The Bank of Mauritius (BoM) has recently amended the law to accommodate its fintech innovation hub and digital lab. Moreover, the Mauritian banking sector has improved its profitability during the year ended December 2018. A higher pre-tax ROA indicates improved profitability. In order to maintain monetary stability, the BoM continues to take all necessary steps to ensure the stability of the local banking industry. So, what are the key factors that contribute to the improved profitability of the banking sector?
Mauritian banks’ assets rose from 55 percent in 2013 to 61 percent in 2018
Mauritian banks are enjoying a remarkably strong financial performance. The total value of their assets increased from 55 percent in 2013 to 61 percent in 2018. This increase is partly due to an expected increase in Africans entering the banking system. However, it also reflects the high cost of funding in Africa, where interbank rates can reach 10 percent and above. Deposits from Africans are considered profitable due to their high rates.
Bank of Mauritius has amended legislation to cater for fintech innovation hub and digital lab
The new regulations have changed the role of the Bank of Mauritius in fostering fintech startups. These companies are responsible for developing new products and services that are not currently offered by banks. In addition, the Bank will provide supervision and guidance for new companies and will cooperate with public sector agencies to set up the digital lab and fintech innovation hub. These regulated platforms will encourage fintech investors and existing entrepreneurs to establish themselves in Mauritius, while creating more clarity for the industry. They will also foster an entrepreneurial culture in the fintech sector.
The legislation will apply to all investors seeking to establish a digital lab or fintech innovation hub in Mauritius. These investors must apply to the Financial Services Commission for asian tax. The FSC will evaluate these applications and grant regulatory sandbox authorisation. Once the financial service company grants the sandbox authorisation, it will work with the Financial Services Commission to oversee them.
These amendments to the Finance Act reflect the Government’s commitment to digital banking. The government is already piloting the Central Bank Digital Currency. In the meantime, the amendments to the Finance Act should prove to be a steppingstone towards building a worldclass fintech innovation hub in the country. By providing these facilities to investors, the country will continue to become a global investment destination.
Bank of Mauritius continues to take whatever steps required to achieve monetary and financial stability
The Bank of Mauritius has continued to implement steps to safeguard depositors’ interests and maintain the reputation of Mauritius as a safe jurisdiction for financial institutions. The Bank also maintains transparency and continues to take whatever steps are necessary to ensure the longterm stability of the financial system. Nonetheless, these steps are not enough. The country still needs to strengthen its anti-money laundering and counter-terrorism framework.
The Bank of Mauritius is a quasi-judicial body that performs a range of functions. One of these is to supervise and regulate the country’s financial institutions. It does this through the Monetary Policy Committee, chaired by the Governor. The Bank is also responsible for the soundness of the financial system and for the regulation of credit and currency in the interests of economic development in the country.
The MPC also noted that the recent increase in headline inflation was transient and that the country’s key trading partners are improving the supply chains. While domestic inflationary pressures remain low, the MPC deemed the current stance of monetary policy to be appropriate. The Key Repo Rate remains unchanged at 1.85 per cent. It is expected to stay at this level until the next meeting of the MPC on 15 December 2021.