Malta: Islamic finance opportunities at the Blockchain Island

Islamic finance in Malta is still in its infancy, where exposure to the market is still being sought after to reach the levels it merits. The potential and benefits that this will bring to the European market is all the more present. While there has been a slump over the past few years, with very little activity for Islamic finance to actually embed its roots into the market, 2018 has thus far been fruitful and Islamic finance is one step closer to penetrate this market.

Review of 2018

As mentioned, 2018 has gone off tangent, compared to the previous years. One of the most prominent news is the setup of the Malta Islamic Finance Association (MIFA), back in June. The memorandum of Understanding was signed by Reuben Buttigieg, president of MIFA and renowned scholar, Sheik Bilal Khan, as the secretary general.

The Malta Islamic Finance Association will liaise with governments, quasi-governmental institutions, multilateral organisations, standard setting bodies, agencies and regulatory authorities. With the input of the stakeholders, as a government, we will be looking at drafting amendments to our legislation that will permit Islamic Financial Institutions to benefit from stronger links with EU member states, amongst other opportunities, said the Parliamentary Secretary for Financial Services, Digital Economy, and Innovation, Silvio Schembri, who was speaking at the Cryptocurrency Considerations for Management conference, hosted by the Malta Institute of Management.

Sheik Bilal Kahn also commented that in the view of Malta being a pioneer in economic innovation, Malta could become the Islamic Finance hub. The reasoning behind such statement lies on the fact that due to Brexit coming at its final stages, Malta could indeed position itself to be at the epicentre of Europe as an Islamic Finance hub, attracting the Islamic market from the UK, in order to enjoy EU passporting rights. Furthermore, since Malta is a member of the commonwealth, this could serve as a bridge to the global markets.

In October at the Delta summit, Alberto G.Brugnoni, founder and managing partner of ASSAIF, was one of the guest speakers talking about Islamic finance to shed light on how this market could be in consideration with respect to fintech.

At the panel entitled “Islamic Finance and Blockchain” it was announced that a steering committee is evaluating various Islamic finance products that can be made accessible through blockchain technology and regulated under Maltese Law.

Islamic microfinance product was one of the main items being discussed. This would see a revolution in the Islamic microfinance industry which should sidestep the difficulties that microfinance posed in various circumstances.

The project which is spearheaded by the Malta Islamic Finance Association (MIFA) and ASSAIF Italia who envisage the reduction in costs for subscribing to the various financing contracts such as Murabahah, Mudarabah and Musharakah. Through the mechanisms of instruments such as smart contracts as well as algorithms that will be certified by Shariah scholars, the project foresees the substantial reduction of costs including continuous Shariah compliance.

OneGram Group also introduced the revolutionary Huulk project, which is a crypto exchange that is known for being Shariah compliant. This crypto exchange is headed to Malta and is currently seeking the necessary licenses to operate. This platform plans to secure more partnerships across Europe according to the CEO, Ibrahim Mohammed.

Shifting the focus on education, both Sheik Bilal Khan and Alberto G Brugnioni, were guest speakers at the University of Malta, giving students insight and perspective, by shedding their knowledge on the subject, especially since they deal with Islamic finance in practice, posing real world scenarios, to assess how Islamic finance truly operates.

The annual Introductory Islamic finance course hosted by the Malta Stock Exchange Institute (MSEI), which saw roughly a 50% increase in the turnout of attendees compared to 2017. 

Preview of 2019

As we draw closer to 2019, further opportunities will arise, and as mentioned with MIFA up and running, Malta will get better exposure to this type of market, not only drawing attention of international bodies, but also help alleviate the interest within the national level, assessing the importance and opportunities of such markets. Since fintech and regtech will be developed further in the financial services sector, Islamic finance has been put up to consideration as well in order to make the Maltese financial sector more resilient to external shocks. This may shed some light that in the not so distant future, we may see amendments to legislations to facilitate Islamic finance, which would be the next step for Malta to truly embrace Islamic finance as a practice.

Conclusion

As a country, Malta is always striving to venture into new markets to better itself, and 2018 has been a successful year in innovative and economic advancement. Amongst all the buzz and hype that blockchain and virtual assets brought to Malta, it was an opportune time for Islamic Finance to get better exposure, as investors from all over the globe already have their eyes set on the Maltese Islands. The setting up of MIFA has marked the start of what is yet to come to the Maltese islands, with regards to Islamic finance.

This article was first published in Islamic Finance news Annual Guide 2019

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