Alternative finance arrangements in Malta : facilitating Sharia-complaint financial instruments and capital markets

Abstract

This thesis seeks to analyse the Maltese legal system in order to explore the possibility of providing a market for Alternative Finance Arrangements, mainly by focusing on the provision of Sharia-compliant financial instruments. Though a number of restrictions exist in Islamic Finance (when compared to a conventional system of finance), this thesis mainly looks at the specific financial instruments developed over the years which have emerged mainly due to the prohibition of the charging of interest. This research, predominantly considers four main financial instruments used in Islamic Finance: the equity-financing instruments, being the mudaraba and the musharaka partnerships, as well as the debt-financing instruments of murabaha and ijara. Vast similarities between these financial instruments and the Maltese legal system emerge. Therefore, Chapters 2 and 3 explore ways and means how the aforementioned financial instruments may be adopted within the Maltese legislative structure. Chapter 4 of this thesis goes on to analyse whether the aforementioned transactions can already be carried out or otherwise under Maltese legislation, subsequently questioning whether these financial instruments can be offered by 'Islamic Banks' within the local context. In order to look into the possibility of adopting the solutions which certain jurisdictions have applied, two systems of law are referred to 5 throughout this research - the laws of the United Kingdom and of Singapore. Throughout the thesis, certain legal aspects found in Maltese legislation which are not in accordance with Sharia-compliant financial instruments, or which hinder the development of such financial instruments, are identified and thereby a number of legislative proposals in the respective contexts have been put forward.