Malta as a centre for islamic finance : an assessment

Abstract

Purpose: This study seeks: to understand the drivers behind the demand for Islamic finance and its applicability to Malta; to explore Malta’s availability, potential, and challenges in providing Islamic finance; and to explore any changes applicable to the local financial reporting regulations, which Malta requires in implementing Islamic finance. Design: A qualitative methodology has been employed, mainly through interviews of a semi-structured. A total of seventeen interviews have been conducted, comprising a variety of respondents such as: local Muslim businessmen, bankers, specialists of Islamic finance, an Islamic banker, as well as other foreign experts in the field of Islamic finance. Findings: Religious faith and the products’ ethical features were identified as the main demand-pull factors for Islamic finance, with Malta’s potential demand being found in the international Muslim community. There are no Islamic finance products being provided in Malta. However, Malta has great potential in the Islamic capital market, particularly Sukuk and funds. The main challenge consists of a lack of human resources. IFRS accounting is found to be compatible with Islamic finance. Conclusions: In order for Malta to become a centre for Islamic finance, it has to well-promote itself with international Islamic investors. The government has to invest its resources and issue a Sukuk so as to place Malta on the map of Islamic finance, while use it to complement the Individual Investor Programme. Malta can also play a role in the development of North African countries. Islamic finance in Malta does not require any alterations to its financial reporting regulations. However, expertise has to be imported. Value: This study raises awareness on Malta’s potential in becoming a centre for Islamic finance, particularly in the capital market; since the necessary legal and regulatory regime is already in place.