Malta is increasingly perceived as an attractive gateway for Islamic finance, a sector which currently sees an annual expansion rate of 15-20 per cent and has an estimated value of $2 trillion as at 2014.
Speaking at the latest educational clinic on Sharia-compliant funds organised by FinanceMalta in collaboration with the Malta Funds Industry Association, some of Malta’s 27 fund administrators discussed how to apply the rules of Islamic finance transactions to the country’s financial regulations.
The suite of investment vehicles offered by Malta’s International Financial Centre also resonates well with Islamic investors, who may set up their funds as Special Purposes Vehicles, Undertakings for Collective Investment in Transferable Securities, Alternative Investment Funds or Professional Investor Funds. Having a regulatory framework in place that allows for protected cell companies and incorporated cell companies, Malta is well placed to accommodate charitable collective funds, better known as Takaful insurance solutions.
To create further awareness about this sector, FinanceMalta will be publishing a new series of sector guides in January 2015, one of which will now focus solely on Islamic finance. The MFSA is also the only EU regulator that has issued formal guidelines on Sharia-compliant investments.
“Since Sharia-compliant funds prohibit interest on loans and generate profits in a socially responsible manner, experienced practitioners are also adamant on maintaining a strong focus on ethics and prudential practices,” FinanceMalta’s head of administration Bernice Buttigieg said.
David Zahra, partner at David Zahra & Associates, explained that the guidelines were meant to create a level-playing field between locally-based fund administrators and investors and to overcome the challenge of applying two sets of regulations to this type of transaction.
“Coupled with concerted efforts by the Maltese government to offer further incentives to investors,this helps Malta achieve top-of-mind awareness status in the Islamic world,” he said.