Italy: A step back toward the development of Islamic finance?
The last months before the summer break appeared to be particularly promising for the development of Islamic ﬁnance in Italy. In early March, a law proposal for the ﬁrst Italian sovereign Sukuk issuance was put forward to the attention of the Italian lawmakers. Immediately thereafter, the ﬁrst Italian Islamic bond structure obtained Shariah compliance certiﬁcation. In May, the chairman of the Financial Committee of the Chamber of Deputies (the Financial Committee), Maurizio Bernardo, brought a clear and ground-breaking law proposal aimed at regulating the tax treatment of certain Islamic ﬁnancial operations executed in Italy, with a view to realize a level-playing ﬁeld for the industry when compared to conventional ﬁnance.
Unfortunately, it would appear that, going through August, the traditional Italian holiday month, when everything is quiet in the country, the development of Islamic ﬁnance in Italy has lost momentum.
Indeed, it appears evident that at exactly the same time when UK Economic Secretary to the Treasury Stephen Barclay stated that the UK will tap the Islamic capital market for the second time in its history in 2019, the law proposal for the ﬁrst Italian sovereign Sukuk has been deﬁnitely put aside and will not be brought to the parliament vote as a result of a lack of interest from the Ministry of Finance.
What a diﬀerent approach between the dynamic UK which is willing to make the most of the opportunities oﬀered by the Islamic investment ﬂow, and the lethargic attitude of a country focused only on day-to-day aﬀairs and which is not able to understand and take advantage of opportunities oﬀered by Islamic ﬁnance!
On the other hand, the market of the Italian Islamic bonds, the so-called Islamic minibonds, also does not seem to have taken oﬀ, with no issuances at the moment, even though a number of Italian SMEs would be interested in taking advantage of the debt instrument and in some cases potential issuances have been actively marketed. It seems that there is little appetite among Gulf investors looking for Shariah compliant paper to put money into lesser-known Italian SMEs via a newly engineered instrument.
Lastly, the law proposal aimed at regulating the tax treatment of certain Islamic ﬁnance contracts has also been put to the attention of the Financial Committee but so far it has not been examined and considering that most of the fall sessions of the parliament will be dedicated to the budget law, as well as the impending electoral period (the next general elections will be held in 2018 if not before), there is little hope that attention will be dedicated to this matter.
This article was first published in Islamic Finance news Volume 14 Issue 39 dated the 27th September 2017