Industry Article

According to a press release from the Bank of Maldives (BML) dated the 22nd January 2025, the institution proudly marks a decade of pioneering Islamic banking services in the Maldives, reflecting the nation's increasing demand for Shariah compliant financial solutions. Since launching its Islamic banking division, BML Islamic, the bank has been steadfast in providing fully Shariah compliant banking solutions with complete segregation of funds, aligning with international standards. In line with its vision to prioritize Islamic finance, three branches in Eydhafushi, Mahibadhoo and Gan have been rebranded exclusively as BML Islamic branches, further embedding the 'Islamic Finance First' philosophy in its operations. Commenting on this milestone, Mohamed Shareef, CEO and managing director of BML, stated: "Celebrating 10 years of BML Islamic is a proud moment for Bank of Maldives. As the largest Islamic bank in the Maldives, we offer a comprehensive suite of products including accounts, cards and financing. BML Islamic was the first to introduce innovative services such as Islamic overdraft financing, cash financing, hybrid home financing, Islamic debit cards and the Maldives' only Shariah compliant credit card. These branch updates underline our commitment to meeting the evolving needs of our customers."

In a significant shift towards financial inclusivity and adherence to Islamic guidelines, the Maldives has announced a comprehensive overhaul of its government-issued education financings. This move comes in response to a directive from Maldives President Dr Mohamed Muizzu, who called for all government financings for higher education, both within the Maldives and abroad, to comply with Islamic principles. The Ministry of Higher Education, which oversees the issuance and management of these financings, has already initiated steps to implement the changes. The primary change involves the restructuring of financing repayments, which will now solely cover the principal amount. This adjustment means that students will no longer be required to pay any additional charges or interest, a move aimed at alleviating the financial burden on borrowers. In addition to this, the ministry has announced that no administrative fees will be applied to financings that have already been repaid. One of the more notable adjustments is the reversal of the 1% administrative fee that was previously deducted from student financings, with repayment amounts being recalculated accordingly. These measures are designed to ensure that the financings align more closely with the ethical and moral standards set forth by Shariah law, which prohibits the charging of interest or unjust fees. The ministry has expressed strong support for the president's decision, recognizing it as a reflection of the government's commitment to making financial transactions more just and equitable for students. The changes are also seen as a part of the broader effort by the Maldivian government to ensure that the country's financial systems operate in line with Islamic finance principles, promoting fairness and transparency.

The Maldives Monetary Authority (MMA) has officially launched the Maldives Islamic Social Finance Initiative (MISFI), marking a transformative step towards embedding Islamic social finance principles within the country's banking system. The initiative was inaugurated by President Dr Mohamed Muizzu at a high-level event attended by senior government officials, regulators and leaders from the financial services sector. In my keynote address titled 'Reimagining the Maldivian banking system through Islamic social finance instruments', I underscored the urgent need to reshape the Maldivian financial ecosystem into one that champions justice (adl), benevolence (ihsan) and systemic inclusion. Drawing from global best practices and rooted in Maqasid Shariah, Islamic social finance is not merely about charity - it is about empowering communities, balancing wealth and building a resilient economy that serves all segments of society. MISFI represents a comprehensive national strategy that integrates traditional Islamic financial instruments - such as sadaqah, zakat, waqf, qard hasan and Islamic crowdfunding - into the mainstream financial system. Inspired by Malaysia's pioneering Sadaqah House model developed by Bank Islam, MISFI has been adapted to the Maldivian context under the guidance of Dr Latifa Bibi Musafar Hameed, whose research laid the foundation for this initiative. This innovative model aligns with the National Financial Inclusion Strategy and leverages technology, transparency and cross-sector collaboration. Commercial banks, by their shareholder-driven nature, are often structurally limited in offering non-profit social finance. MISFI creates a dedicated, purpose-driven framework that complements - not competes with - Islamic banks, enabling efficient fund mobilization, enhanced governance and structured outreach to underserved communities.

Islamic finance in the Maldives is experiencing remarkable progress, with significant developments in banking, waqf investment and zakat collection, reflecting increased public trust and institutional efficiency in the sector. Maldives Islamic Bank (MIB), the country's first full-fledged Islamic bank, has announced a record net profit of MVR282 million (US$18.26 million) for 2024, marking a 60% increase compared to the previous year. The bank's total asset value grew from MVR10 billion (US$647.6 million) in November 2023 to MVR11.4 billion (US$738.1 million) by the end of 2024. MIB attributes its success to improved customer confidence, enhanced digital services and innovative banking solutions. The bank is the only one in the Maldives that offers online account opening services, which contributed to a rise in deposits to MVR9.12 billion (US$590.48 million) by year-end. MIB also won two international awards in 2024, further cementing its position in the global Islamic finance sector.

Technically, sukuk that are traded in the secondary market are quoted based on the spreads to a particular risk-free security, such as government investment issues (GII). In the conventional bond market, these spreads are known as credit spreads. The credit spreads are the main focus of investors in corporate bonds. Similarly, the sukuk spreads indicate the compensation to risk, referred to as the risk premium. The risk premium is the factor that makes investors willing to invest in sukuk despite the risks that they may encounter. Even though sukuk are structured based on the different kinds of contracts, which can be sale-based, leased-based, partnership-based or agency-based, the associated risks to sukuk is mainly reflected in the spreads, which is comparable with other sukuk that possess similar rating, duration and outlook for trading purposes. For example, a fund manager observes that the 10-year 'AAA' Idaman Sukuk is trading at a spread of 108bps above the 10-year GII. If another corporate sukuk with similar credit rating, duration and outlook were trading at a 115bps on a relative value basis, the second sukuk would be a better buy. Why? This is because with the same risk, the investor could get a higher compensation or premium (115bps vs 108bps) by investing into the second sukuk. This is one of the strategies carried out by the fund manager in an active sukuk portfolio management.

This project summary outlines research examining the impact of Waqaf An-Nur Corporation Berhad (WANCorp) community development programs. WANCorp is a company limited by guarantee dedicated to utilising waqf (endowment) principles to foster community and economic development. Its mission is to channel waqf resources into initiatives that uplift society, including programs in healthcare, socioeconomic empowerment, spiritual enhancement, and welfare support. In 2019, the Johor State Islamic Religious Council entrusted WANCorp to manage Johor's Business Zakat Agency (JCorp). This strategic move expanded WANCorp's reach, allowing it to serve a broader beneficiary base through a range of impactful programs. The Centre of Excellence for Islamic Social Finance (COE ISF) researchers employed the Theory of Change framework to evaluate its programs' societal impact. This model analyses how specific interventions can generate measurable improvements in community welfare by mapping the pathway from inputs to processes, outputs, and desired outcomes.