In the budget speech, the Government had announced the introduction of Islamic Banking in Malta. A year has nearly passed but there has been no word from Government about this initiative. In the wake of the terrorist attacks in Tunisia, Somalia, Kuwait and France, does our Government still intend to introduce this sort of financing? Does it still see it as beneficial or is it now perceived as a threat? Without any doubt the introduction of Islamic Banking will be a challenge to our young democracy.
To my knowledge, there was no legislation in this regard, even if, one cannot exclude that it is being quietly carried out by one of the private banks. Introducing formally such a new financial service is going to be a challenge for Malta and this is irrespective of IS terrorists attacks or not. The budget speech lacked information about this financial mechanism, which is highly provocative in structure. No one was expecting details during such a speech, as budgets are there to outline policy. But nothing else was heard, at least, in the open.
Definitely, my assessment about the introduction of Islamic Banking is that should this happen, it is going to be a challenge to both Government and the Opposition. There can be no doubt that the Government looked at the matter from a purely commercial point of view without paying any attention to certain core values. These were simply ignored as is only too often happening these days. But the attacks by ISIS are bringing the issue of core values to the fore again. This is not only relevant to Islam but also to the Western world.
Possibly, the Opposition thought that if it decided to oppose it and question Government, it risked being faced with an accusation of being negative and of hindering Malta’s further expansion as a Financial Centre. One needs to remember that Malta’s development as an International Finance Centre had never been the source of political controversy and the PN received all the support from the then Labour Opposition. At least, this was a point, which both John Dalli and the late Lino Spiteri agreed on.
I am sure that any negative approach by the PN to Islamic Banking once it is implemented would provoke an easy spin for Government to put the PN on an off course. The simple argument would be that if Islamic Banking is acceptable in the UK, then what's wrong with Malta? Well, maybe we ought not to compare Malta with the UK but even the UK is starting to question a number of core values and accommodating policies to Islam.
But do we need to take the UK as a model? One needs only to remember that the Muslim community in the UK is now 4.2% of the population. There are streets in the UK where Sharia law reigns ‘unofficially’ supreme. It has been unceremoniously introduced by Muslim residents. British, non-Muslims and moderate Muslims now fear to enter a number of Muslim areas.
The UK is now starting to debate whether it is time for the introduction of the Islamic inheritance system, which bluntly discriminates against women, and is all in favour of men. In other words, if this is done, the UK will be going back to the Middle Ages, when the feudal system reigned supreme. In Quebec, Muslims are also demanding the introduction of Sharia Law and the secular state is in difficulties not due to principle but as those protesting are being financed by America’s Arab friends.
On the other hand, should the PN publically endorse Government’s proposal, would it be seen by the rank and file of the Party to be compromising its core values and principles? Perhaps this explains its silence on this issue. It is here, where Government and Opposition need to tread with care but it is about these points that the PN Opposition should be pressing and concentrating. Allow me to explain this by making a few observations.
Currently Malta is seen as one of the top countries in the fight against money laundering and terrorism funding (see for example the Basle AML index). With the introduction of Islamic Banking, the biggest preoccupation would be whether such a position would be negatively affected. Definitely, if Islamic Banking is introduced, we (as a country) must put in place strong safeguards against financing terrorism. Is the Government really ready to take up such a challenge? Has it got the means?
As a Financial Centre and following the introduction of Islamic Banking, does Malta run the risk of being downgraded in the perception of the international community? Perhaps one would argue that England has introduced Islamic Banking and apparently, it remains a world centre of Finance, but the way that Cameron is reacting to migration points to a change of policy.
My other concern is on the role of the Regulator. I am still at a loss on this. Despite a long Budget Speech, such an essential issue was not tackled by the Minister of Finance. I do not consider that I will be throwing any bad light on the institution if I say that MFSA is far from being prepared for such a proposal. But there again, should MFSA be the Regulator? The recent controversies into which MFSA was dragged in relation to money funds that had gone astray and the answers given by the same MFSA leave much to be desired as well as to the reality of how well equipped and well prepared is such an Authority to act as Regulator. Can this institution guarantee that our good reputation in the banking sector does not go amok thanks to the introduction of Islamic Banking? I have some misgivings on the matter.