IslamicFinance.de

Malta continues to take the lead in attracting blockchain and cryptocurrency ventures and now also in the upcoming Islamic finance scene. The new Sharia compliant cryptocurrency exchange Huulk has applied for a digital exchange license in Malta and hopes to partner with several European exchanges in the coming weeks. According to Huulk CEO Ibrahim Mohammed, Malta’s Bianchi Holdings would be an equity partner in the exchange. Bianchi Holdings Chairman Michael Bianchi is also involved in other blockchain and cryptocurrency ventures. The Huulk exchange is aiming to list around 20 Islamic fintech firms, some of which operate in Muslim-majority countries like Turkey and Malaysia. OneGram also plans to list its own sharia-compliant cryptocurrency on the exchange by mid-September. OneGram has sold around $400 million in gold-backed tokens over the past year.

Malta Islamic Finance Association (MIFA) was officially launched on 26th June 2018 by Parliamentary Secretary for Financial Services, Digital Economy and Innovation Silvio Schembri. The present government headed by Prime Minister Joseph Muscat fully supports and endorses all efforts for establishing Islamic Finance in Malta. Malta Islamic Finance Association aims to liaise with governments, quasi-governmental institutions, multilateral organizations, standard setting bodies, agencies and regulatory authorities. The Governing Council of MIFA has appointed Mr. Reuben Buttigieg as President of MIFA and Sheikh Bilal Khan as Secretary General of MIFA for the first term.

In 2008, the Malta Financial Ser­vices Authority was the first EU regulator to issue guidelines on Islamic finance, which were updated in 2015-2016. In 2016, the Malta Stock Ex­change launched an Islamic Equity Index in order to attract investment and business from the Middle East. From a legislative aspect, Malta is already well-geared to welcome new structures that provide for Islamic finance. Malta is the only EU member country whose regulatory framework provides for protected cell companies and incorporated cell companies. Thus it may easily accommodate Takaful insurance solutions. Islamic investors are given the opportunity to set up their funds as Special Purpose Vehicles, Undertakings for Collective Investment in Transferable Securities, Alternative Investment Funds or Professional Inves­tor Funds. Islamic finance institutions may also generate funds by listing on the Malta Stock Exchange.

Discussion about sukuk bonds is on the increase. The government of Malta has also considered issuing this type of security. Meanwhile, many established players on the international capital markets are issuing sukuks. A sukuk has a secondary market in the same way as a typical bond has and investors may buy, hold or sell the sukuk after this has been issued in the primary market. Hence, liquidity considerations are also relevant for sukuk bonds. The buyer of a sukuk bond is indirectly buying an asset that has value rather than entering into a loan obligation with the issuer of a typical debt instrument. Importantly, the number of investors in the Islamic world cannot be ignored and therefore Sharia compliant vehicles capable of attracting their wealth are increasingly relevant. The sukuk is a good starting point for issuers to tap into this reality.

The Malta Stock Exchange (MSE) will launch on Monday an Islamic equity index aiming to attract business from Middle East firms, a move it hopes will also prompt the government to issue Islamic bonds. The launch of an Islamic index, developed alongside Dubai-based sharia advisory firm Dar al Sharia, and a debut sovereign sukuk would mirror steps taken by Britain and Luxembourg to develop their own credentials in the sector. In 2011, Malta's financial regulator issued a guidance note on Islamic investment funds, the first EU member country to do so, although no such funds have been listed yet. The exchange is also launching this month a new capital market for small and medium-sized firms.

Without any doubt the introduction of Islamic Banking will be a challenge to Malta. There can be no doubt that the Government looked at the matter from a purely commercial point of view without paying any attention to certain core values. But the attacks by ISIS are bringing the issue of core values to the fore again. Currently Malta is seen as one of the top countries in the fight against money laundering and terrorism funding. With the introduction of Islamic Banking, the biggest preoccupation would be whether such a position would be negatively affected. Another concern is on the role of the Regulator. Despite a long Budget Speech, such an essential issue was not tackled by the Minister of Finance and MFSA is far from being prepared for such a proposal.

Fimbank is about to make the first step into introducing Islamic banking to Malta. Provided that Middle Eastern institutional investors take a controlling interest in the near future, the bank will be able to expand into new markets and target larger clients. Fimbank has a commitment for additional equity of $160 million. According to the bank's president Margrith Lütschg-Emmenegger, it has the potential to triple or even quadruple its balance sheet over the next five years. She further stressed on the bank's striving towards a major strategic turning point. This will be possible if shareholders allow the joint offer by Kuwait-licensed Burgan Bank SAK and Bahrain-licensed United Gulf Bank BSC at the extraordinary general meeting on January 31st.

The Malta Financial Services Authority (MFSA) has published a Guidance Note for Shariah Compliant Funds.

The document explains how the legal and regulatory framework established under the Investment
Services Act would apply to Shariah-compliant funds established under Maltese law.
The MFSA stated that Malta’s principles-based regulatory regime lays emphasis on the
disclosure of all information that the investor needs to know before taking the investment
decision and on the transparency of investment management process itself. This allows a
high degree of freedom on the choice of investment strategies and asset allocation
policies adopted by investment funds, subject to conditions that vary according to the
level of experience and investment expertise of the target investor.

On this basis, the Guidance Note establishes that, whether set up as Professional Investor
Funds, UCITS or non-UCITS Retail Funds, Shariah Funds may be regulated in the same
manner as non-Shariah Funds. The level of disclosure and the applicable conditions
would be the same as those that are applicable to the respective category of retail or

Malta should be in a position to issue guidelines on securities under Islamic finance law by the middle of the year, but there were still legal and technical problems to sort out with respect to banking, Finance Minister Tonio Fenech said.

The Malta Financial Services Authority (MFSA) has set up a five-person working group chaired by its director for strategic development, Dr Michael Xuereb, to identify further necessary legal and regulatory changes and related implementation procedures with respect to Sharia Institutions and Sharia Funds.

Investors from Dubai are negotiating with government officials of Malta on a number of assets and projects in the Mediterranean island state. Dubai has already become a leading investor in Malta's economy with investments totalling near USD 1 bn over the last few years including the USD 300 mn SmartCity project, Euro 500 mn in International Hotel Investments (IHI) Group which owns Corinthia Hotels, as well as Tecom Investments' acquisition of a stake in Maltese telecom operator Go, with many more to come.

In the coming weeks, Malta will be explored by a large institution for its potential to the introduction of the Sukuk

Any organisation interested in participating in an information session being organised with the visiting institution or in having one to one meetings are invited to send an email to Reuben Buttigieg on rbuttigieg@maltamanagement.com

The Malta Institute of Management (MIM) met up with Opposition Leader Dr Joseph Muscat, to present a copy of Dr Robert Attard’s Principles of Maltese Taxation.

Hon Dr Muscat said that Malta has a big opportunity ahead of it. MIM has spearheaded the discussion in Islamic Finance in Malta and the Labour Party has supported it throughout. Reuben Buttigieg explained how Malta can be marketed as an Islamic Finance centre through the direct intervention of the government through the issuance of Sukuk.