CAIRO — With many Western countries introducing Shari`ah-compliant banking, Maltese experts believe their country should join in to reap the fruits of the booming industry.

"There can be opportunities for both employers and employees in other industries if Islamic finance is introduced in Malta," Reuben Buttigieg, chairman of the Malta Institute of Management, told the Times of Malta on Sunday, December 21.

"If Malta wants to head that way, we could have the three main branches of Islamic finance in the span of a year."

The Malta Financial Services Authority (MFSA) has issued a consultation document on Islamic finance for the industry to give a feedback.

"It is expected that two other consultation documents will be issued next year regarding Takaful and Sukuk," said Buttigieg, also the managing director of Erremme Business Advisors.

"After that, it very much depends on the MFSA and government to ensure we do not miss this golden boat."

Buttigieg believes that the political establishment in Malta, an island country with a 400,000-strong population, is willing to introduce a Shari`ah-compliant system.

"The good news is that the two political parties have expressed themselves in favor of enabling Islamic finance. Finance Minister Tonio Fenech has also spoken positively about the issue."

Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Islamic finance is already one of the fastest growing sectors in the global financial industry.

Currently, there are nearly 300 Islamic banks and financial institutions worldwide whose assets are predicted to grow to $1 trillion by 2013.

Magnet

Buttigieg believes Malta can easily become a magnet for Islamic finance.

"Islamic finance in euro is something that seems to be lacking, while it is available in sterling and dollar. There is substantial cost-saving on this aspect alone," he argues.

"If the government wants to attract a massive inflow of investment it should issue Sukuk itself, and then the entire Muslim world would be looking at Malta, particularly people in European countries with no investment opportunities."

The Sukuk market has reached $111.9 billion in the eight years to 2008 and a further $69 billion is expected to be issued in 2008/2009, according to the International Islamic Financial Market.

Buttigieg thinks Malta would be able to attract Islamic finance from Arab as well as European countries.

"Today there are Islamic finance institutions that are setting up in the Cayman Islands to try to tap into Libya and benefit from the tax legislation," he noted.

"Malta can offer that advantage too, with even more added value to it. Our legislation on trusts is also a tool we can use with respect to Islamic finance structures," he added.

"It is also an opportunity for our government to enter into more double taxation agreements with Arab countries."

He sees Italy, which has not yet introduced Shari`ah-compliant systems, as a particular target market.

"There are some 70,000 Arab holding companies in Italy and some one million Muslims. Companies seem to resort to banks in the Middle East to obtain Shari`ah-compliant finance. Malta is 90 kilometers away and an EU member," he notes.

"It would be much more efficient for them to use the available funds in Malta or to invest excessive cash here."