Islamic microfinance products
The Delta Summit brought together the blockchain community, which is said to be the first of its kind given that Malta is the only jurisdiction in the world that is regulating virtual financial assets and innovative technologies.
During the panel entitled Islamic Finance and Blockchain, it was announced that a steering committee was evaluating various Islamic finance products that can be made accessible through blockchain and regulated under Maltese legislation.
The main item discussed was the implementation of an Islamic microfinance product that will see a revolution in the Islamic microfinance industry and which would circumvent the difficulties that in many circumstances Islamic microfinance has faced.
The project, which is spearheaded by the Malta Islamic Finance Association and ASSAIF Italia, envisages the reduction in costs for subscribing to the various financing contracts such as Murabaha, Mudarabah and Musharakah. Through mechanisms such as smart contracts as well as algorithms that will be certified by Shariah scholars, the project foresees the substantial reduction of costs including continuous Shariah compliance.
Through the project, investors can rest assured that their money will only be used for Shariah-compliant products and cannot be used in any other way. This shall be achieved in two ways – through smart contracts that shall ensure automatic Shariah compliance and through the launch of a coin that cannot be used for haram products or services. This automation will reduce the Shariah compliance and administration costs.
Reuben Buttigieg, MIFA president, said this was just the beginning of various projects that MIFA will be launching. It was now the time that Malta truly became the Islamic finance hub that it ought to be, he said. Blockchain can be used to ensure better utilisation of Islamic funds and ensure that no capital is left dormant. In this context, projects related to Zakat, Islamic philanthropy, Islamic inheritance matters and also Waqf were being studied.
Alberto Brugnoni, ASSAIF president, said that the Islamic microfinance fund has been a project in the pipeline for a number of years as ASSAIF has been working on similar products intensely for the common good of people around the world. Distributed ledger technology, as regulated in Malta, has given the instrument to render this project even more possible, he added.
MIFA is the first and only national body of its kind created by statute and endorsed by the Maltese government. MIFA was officially launched in June 26 by the Parliamentary Secretary for Financial Services and Digital Economy and Innovation, Silvio Schembri. MIFA liaises with governments, quasi-governmental institutions, multilateral organisation, standard setting bodies, agencies and regulatory authorities for support towards its goals.