By Nondas Cl Metaxas, Director General – CEO of the Cyprus Stock Exchange
ISLAMIC Finance is traditionally a very important sector in the Islamic financial world, providing finance to significant projects for economic development, as well as alternative options and tools for investments.
Islamic Finance can take various forms, both in terms of bonds, as well as in terms of Funds, and be listed on the Securities Exchanges.
The Cyprus Stock Exchange is currently intensifying its efforts for promoting new initiatives and plans in this direction in order to help our country overcome the present difficult and challenging economic situation,thus contributing to the rebuilding of Cyprus’ economy.
As it was noted recently, one of the industries that the Cyprus Stock Exchange has focused its efforts on, and was included in its strategic plans, is the development of the Funds sector, in order to extend the range of products offered to investors and consequently facilitate the further development of the financial market in Cyprus.
Very recently, within this general direction, the Cyprus Stock Exchange has started examining, along with other interested authorities and market participants, the possible development of the Islamic Financial Instruments.
Everybody considers this sector as extremely important and see the efforts being undertaken favourably with the aim of promoting Cyprus as an effective jurisdiction for Islamic Finance and for promoting their listing on the Cyprus Stock Exchange.
Islamic Finance are considered internationally as a credible alternative source of funds in light of the credit crunch worldwide that has contributed significantly to the economic growth throughout the Muslim world. For this sector, a growing demand was exhibited during the last years for securing finance, in regards to a number of projects, supporting many industrial sectors.
Islamic Finance products, should always comply with Shariah Law, which sets the framework regarding the permitable investments in various assets. Among them, we mention the restriction about charging of interest, about uncertainty (there must always be full disclosure), the excessive speculation or gambling, as well as the avoidance of unethical investment, given the fact that Islam is intolerant of certain products. Therefore such investments should in advance receive relevant licensing, while they are constantly monitored by independent bodies of internationally recognised experts, namely a Shariah Scholars Boards, who verify the compliance with Islamic Law.
A number of financial products that come under the Shariah compliant entities, invest in a wide range of sectors, such as equities, real estate, infrastructure for development, private equity etc.
Sukuk is one of the commonly used Islamic Structures in project finance, classified in various forms such as, among others, istisna’a ijara, wakala ijaras etc Other forms of Islamic Funds include Parallel Islamic Funds, Equity Investment Funds, Real-Estate Funds (REITs), etc. Sukuks are certificates representing ownership of an underlying pool of assets and most of them are asset-based. Sukuks are used for developing new big projects.
Therefore, given all the above as presented in brief, it is obvious that there is potential for Cyprus with regards to Islamic Finance products. Cyprus’ projects can be wholly or partly financed by Islamic funds. Sukuk listings for various projects including the shipping industry, present a clear opportunity for the Cyprus Stock Exchange.
The Cyprus Stock Exchange, in case there is interest from Cyprus or abroad could facilitate the listing of Islamic Finance products, sukuks as follows:
Through the facility of listing of such products on the Cyprus Stock Exchange, that have been established/issued by other sovereigns or organisations; through the listing of Cyprus sovereign or other organisations’ sukuks. This initiative could take place within the framework of accomplishing big projects for economic development, which could be financed via such Cyprus schemes.
In order for Cyprus to be advanced as an Islamic Fund domicile worldwide, it should be competitive in terms of listing procedures, backed by the authorities and the private sector, as well as to provide an efficient and speedy listing process – as a listing destination. Cyprus’ law should be fully compatible with Shariah principles and Cyprus should always be a cost-effective, low tax jurisdiction and listing centre.
A range of vehicles available to address the specific needs of investors and promoters should also be provided. As regards the Cyprus Stock Exchange, it should be noted that it adequately provides all these credentials, in relation to its listing process, as well as for the cost and speedy process factors.
It is believed that the development and promotion of CSE’s initiatives, such as the Funds Industry, New Markets. Islamic Finance projects, Bonds, etc, could bring significant benefits to the Cyprus economy, as well as to the Cyprus Stock Exchange.
They can also contribute to a significant extent to the process of securing the required fundraising for major projects for development, the creation of new jobs and the expansion of partnerships with various professional investment groups. Such initiatives should therefore contribute to the efforts of attracting further investment in Cyprus.
Last but not least, it should be underlined and stressed that the CSE is ready to discuss listings of Islamic financial investment with interested parties.
We very much welcome such initiatives and we are here to work with anybody interested to see them materialise, as fast as possible.