Tiny Malta has long flirted with Islamic finance to put it more firmly on the map as an offshore banking center. Ironically, the country may have now identified an ideal project for a sukuk—sometimes called an Islamic bond—at a time when it may not need Middle East capital. The tunnel between the islands of Malta and Gozo can probably be financed easily through a conventional debt offering. It does not take much yield to attract worldwide capital in this market. The case illustrates the point that Islamic finance may be losing traction internationally, at least for now. Any global sukuk issuer will be squeezed by the enormous demand for capital within the Middle East itself. And those Gulf institutions which are drawn to distant opportunities, such as the sovereign wealth funds, often have only a circumstantial Shariah-compliant bias. ■
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