Consultation ends on introduction of Islamic finance to Malta

Points of Essence:

• Malta Financial Services Authority received good feedback when it consulted the public and financial services stakeholders to introduce Islamic finance in Malta.
• Following this consultation, Malta will be issuing a consultation document on Islamic Bonds (Sukuk) by the end of 2008 and another on Sharia Insurance early in 2009.

A public consultation period on the introduction of Islamic finance to Malta expires today, after which the Malta Financial Services Authority is to begin wading through feedback on the issue from financial services stakeholders and the public at large.

Following the present consultation, the MFSA intends to continue its work on Islamic finance by issuing a consultation document on Islamic Bonds (Sukuk) by the end of 2008 and another on Sharia Insurance early in 2009.

Islamic finance refers to financial services systems that are consistent with Islamic (Sharia) law. In particular, Islamic law prohibits usury, the collection and payment of interest, and prohibits investing in businesses that are considered unlawful, or haraam – such as businesses that sell alcohol or pork, or businesses that produce media such as gossip columns or pornography, which are contrary to Islamic values.

The MFSA envisages a number of opportunities for the setting up of Malta-based Islamic financial institutions as fully fledged banking institutions, as well as a number of opportunities for the setting up of Sharia compliant funds in Malta.

Publishing their joint feedback this week the Malta Union for Bank Employees, the Malta Employers Association and the Malta Institute of Managers welcomed the MFSA’s initiative and pronounced themselves as firm believers in Malta’s potential to attract Islamic finance.

The joint feedback from the MEA, MUBE and MiM advocated a good understanding of all available contracts in Islamic Commercial law by those responsible for the development of the sector while such persons must also liase with the main international bodies dealing with Islamic Finance and standardisation issues.

They also advised that, “Malta needs to avoid repeating the mistakes made with respect to the Pension Funds, which resulted in the failure to attract appropriate investment.

“In this respect, a team of experts should be set up in order to monitor the developments and study ways on how to attract Islamic Funds to Malta. This may be done within Finance Malta. However, the mechanics of this team should be different from that of the other expert groups in Finance Malta. Finance Malta needs to invest in this lucrative niche.”

The MEA, MUBE and MiM also advised that double taxation agreements be sought with major Islamic Financial Centres, while the foreign affairs ministry should also be involved in an expert group, particularly with experts of relations with Islamic countries.

A focus group set up by the trio, however, expressed concern over issues related to legal certainty and the role of Sharia Supervisory Boards, as well as on other issues on transparency and corporate governance

On the issue of the development of Sharia compliant funds, the group said it had some concerns along these lines but generally agreed with the MFSA’s approach toward the matter.

In its paper, the MIM, MUBE and the MEA stated they are “firm believers in Malta’s potential to attract Islamic finance”.

The organisations have also been organising activities and discussing matters related to Islamic Finance for a number of months. The organisations’ focus group is to continue actively working in the area so as to assist Malta in tapping the “lucrative market”. It adds it is “willing to meet with the appropriate section within the Malta Financial Services Authority in order to develop further its arguments and recommendations”.

Source: Independent.com

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