Towards a Mediterranean Islamic Stock Exchange in Malta

Reuben Buttigieg

Malta has now been discussing the introduction of Islamic Finance for nearly three years. Nonetheless, unfortunately Malta has yet to introduce the necessary legislative changes to ensure dealing with discrimination against Islamic Finance in a timely manner.

In early 2007, the Malta Institute of Management, the Malta Employers’ Association and the Malta Union of Bank Employees all expressed a positive vision with respect to this lucrative and fast growing sector. The major political parties endorsed this vision too. This was before the last General Elections. But one still has to see some effective light at the end of the tunnel. Indeed, one continues to hope that the Prime Minister’s political commitment will translate as early as possible into the necessary action to set all essential legislative changes on a fast track to ensure that Malta builds a good reputation in good time and before its competitors.

One fully understands that the Prime Minister and his government have their own list of legislative priorities. However, one also believes that, Islamic Finance today presents a kind of competitive race which Malta cannot afford to risk losing by not arriving, and do so decisively, in good time. Malta has to ensure that it will not end up second to any other jurisdiction , as otherwise it will once again collect leftovers. On the contrary, Malta should have its name on the Islamic Finance map as fast as possible.

The term Islamic Capital Market (ICM) is perhaps a misnomer to many as technically the majority of the features required by an ICM derive from the conventional market. Islamic shares, for example, can be conventional company shares purchased on the Malta Stock Exchange as long as they are Shariah compliant. However, it is my opinion that there are sufficient components of a capital market unique to Islamic Finance. By way of example, a capital market needs agencies to rate the companies whose shares are traded on stock exchanges. Many such agencies exist specifically to address issues of Shariah Compliance and to rate shares that are traded as Islamic, such as the Dow Jones Islamic Market.

The Malta Stock Exchange is in an ideal position to engage into facilitating such a market. If Malta provides such an opportunity to the Islamic Finance \world at an accelerated pace, I believe Malta could establish itself as the Mediterranean Centre for Islamic Finance. The Malta Stock Exchange, being such a small Exchange needs to find niche growing markets for it to develop at the levels Malta deserves.

With Libya opening up to Islamic Finance, with a considerable amount of transactions being done in Italy, France, Switzerland, Egypt, Algeria and Tunisia, amongst others, this is the right time to penetrate the market and to establish the Malta Stock Exchange as The Islamic Mediterranean Stock Exchange.

The proliferation of ICM products has been gathering momentum since the year 2000 in the far and Middle East. In the Euro Med market it appears that ICM is gaining a growth in momentum right now. Indeed, a considerable number of Islamic investment funds have been delivered by conventional institutions such as UBS, Deutsche Bank, ABN Ambro and BNP Paribas. In this growth scenario, with even smaller names investing in the region, Malta needs and has to take a concrete timely decision on whether if Malta wants to truly benefit from this proposition.

Needless to say, this will work only if all the tools and instruments are in place. Ergo, we will again depend on whether the Authorities will identify and set up the appropriate resources to act in a timely manner. Furthermore, as in anything else, it is also a question of marketing and commitment. Will the Government of Malta succeed in attracting the necessary attention of the Islamic Finance World by being the first in the EU to issue a Sovereign Sukuk at state level? Also in this case, we have an opportunity ahead of us with the various Capital projects that Government has in the pipeline.

Thanks,

Reuben Buttigieg

rmb@erremme.org