Malta: An opportunity for Medium sized companies

Malta is the southernmost country in Europe and has always promoted itself as a gateway to Europe and North Africa. In 2010 it was stated that Malta could become the Bahrain in the Mediterranean.

Malta has over the years done little to take this vision forward.  However, in 2016 a new era began, which could result in Islamic Finance having a major boost in the coming years.

Review of 2016

In 2016, Islamic Finance activity in Malta continued to grow as more Islamic Finance Institutions have been using Malta within their structure. This is particularly due to the Trust legislation that Malta has aligned with its advantageous tax environment.

An important step forward was the Launch of the Shariah Compliant Index by the Malta Stock Exchange. There are 8 companies listed on the Shariah compliant listing. In the same period, the Malta Stock Exchange a programme titled Prospects was also launched, which encourages companies looking for finance to list on this programme, which has fewer reporting commitments and reduced costs.

Preview of 2017

During November 2016 the Malta Stock Exchange launched its National Capital Markets Strategic plan. Islamic Finance development is one of the main pillars in this document, whereby the Malta Stock Exchange is viewing Islamic Finance as a massive opportunity for Malta and for Shariah Compliant Companies.

In Malta there is excess capital, which if properly targeted may be tapped into for the generation of Capital. Every call for Capital is oversubscribed which gives clear indications of the aforementioned.

With the Shariah listing, the Malta Stock Exchange is enabling Shariah compliant companies from around the globe to access finance. This is particularly so for small and medium enterprises which are not in a position to list on larger stock exchanges, due to fees and compliance costs. The Malta Stock Exchange through Prospects has become also familiar with micro enterprises which may start using this list to gain experience and subsequently list on the main market.

The Government of Malta is expected to concretely support the Malta Stock Exchange, as this measure is also seen to boost further the citizenship scheme promoted by Malta. This is due to the fact that to date Muslims cannot apply for this scheme in view of its requirements. However, if the Government of Malta finally launches the so awaited Sovereign Sukuk this challenge would be addressed. In this sense, the Government has left the market on hold for the last two years following its bid to look into Sukuk in 2014.

The country is experiencing a positive economic moment, albeit growth is seen to be more on the construction industry rather than in long term sectors. However, this means that in the current climate, the Government does not need cash, although huge long term infrastructural projects seem to have been lacking in the country. Perhaps a forward looking Government may tap into the Sukuk opportunity to address certain national concerns.  If the Government of Malta launches such Sukuk, then the Stock exchange would be in a better position to promote its Shariah listings. The Government of Malta would have sent a strong message to the Islamic Finance World.

Malta will hold the EU Presidency for the first 6 months of 2017, which grants it the opportunity to lead the European Union in addressing matters that are of interest to the Islamic Finance world.  There are 2 million Muslims in Europe who are not being allowed to practice properly their beliefs despite the rights given by the European Convention of Human Rights.  Malta may lead in this and give Muslims as well as people who believe in this method of Finance, a better future tied with opportunities that Europe may be open to, if it puts Islamic Finance on the same level playing field as conventional finance.

Valletta 2018 is also an opportunity for Malta to promote its history and culture, as it will be the cultural capital city of Europe. If one analysis the history of Malta, one will find strong links to the Arab and Muslim world.  It is claimed that throughout the ages Malta had a number of Islamic Finance transaction and the foundations of one of its mid-tier banks finds its origins in transactions similar to Takaful. Perhaps Malta will use V2018 to promote itself better in encouraging Islamic Finance in Malta.