Functioning of the financial system and investment in Mauritius Functioning of the financial sector in Mauritius
In Sub-Saharan Africa, Mauritius is recognized as one of the most dynamic economy and has been ranked the 25th in the World Bank’s DB. Mauritius Island holds the 25th position out of the 190 countries and considered as the No. 1 African countries.
Mauritius has climbed 24 steps compared to the last year’s ranking where Mauritius was on the 49th position.
Mauritius has strengthen its economic position as being the most competitive in the Sub-Saharan African zone compared to other countries such as Rwanda (41), Morocco (69), Botswana (81) and South Africa (82).
The remarkable progress of the Mauritius along with its significant successes in the economic and social sector shows their good governance, economic stability and progressing level of development in the legal infrastructure, financial and commercial.
The small democracy is adhered to OECD countries and has managed to create an open, accepted, respected and fully integrated economy in the world’s market.
Mauritius is ranked under the upper-middle-income category, with one of the highest level of welfare in Africa with a per capita income of US $ 7 250 in 2008. An equality in the purchasing power, and the GDP per capita are estimated at 9 760 US dollars in 2011, which is four times the African average.
This remarkable Mauritian economy is turned into a dynamic industry of financial services, tourism and exports of sugar and textiles.
The economy has recorded an average of an annual growth of 4.8 % between 2006 and 2008; a decline is seen since 2009 due to the deterioration of the terms of trade. This may be due to the expiry of the agreement of the multi-fiber, fall in sugar prices and impacts of the global crisis on the tourism section and the demand for exports, especially when it comes to textiles.
The GDP has grown from 5.5% in 2998 to 3% in 2009, before getting back to 4% in 2010.
The GDP growth is also seen at 4.1% in 2011 and 4.2% in 2012.
Nevertheless, the export and tourism sectors depends on the European economies to make the country dependent in the economic recovery of the euro area.
Mauritius has a fairly good financial system.
The core sector of the infrastructure such as payment systems, securities trading and regulations are modern and efficient. There’s a broad access to the financial services, with more than one bank account per habitant.
The financial sections is growing at a fast pace. This shows a total amount of bank assets reached 300% of GDP at the end of 2008, compared to 200% in 2002.
This brings shows thatMauritius has created a reputation as an important offshore banking center, attracting capital from all over the world including Asia and the United States.
At present, Mauritius is the largest source of foreign direct investment to India.
The other elements of the financial sector are smaller. For example, the assets of the insurance sector and pension sector represent the equivalent of about 50% of GDP, and the capitalization of the stock market represents around 80% of GDP.
The amount of the total assets of the 13 non-financial institutions accepts deposits subject to the regulation, including leasing companies and state financial institutions, which is equivalent to almost 15% of GDP:
· ABC Finance & Leasing Ltd.
· Barclays LeasingCompanyLimited
· Capital Leasing Ltd
· Finlease Company Limited
· Cim Leasing Ltd
· Global Direct Leasing Ltd
· Prudence Leasing Finance Co. Ltd
· Mauritius Housing Company Ltd
· Mauritian Eagle Leasing Company Limited
· SBM Lease Limited
· SICOM Financial Services Ltd
· The Mauritius Civil Service Mutual Aid Association Ltd
· The Mauritius Leasing Company Limited
The banking system is well-developed and efficient, consisting of 18 banks accepting deposits, and two largest banks holding about 70 percentof all bank assets:
- Bank of Baroda
- Bank of Mascareignes Ltee
- Barclays Bank PLC
- Deutsche Bank (Mauritius) Limited
- First City Bank Ltd
- Habib Bank Limited
- HSBC Bank (Mauritius) Limited
- Indian Ocean International Bank Limited
- Investec Bank (Mauritius) Limited
- Mauritius Post andCooperative Bank Ltd.
- PT Bank International indonesia
- SBI International (Mauritius) Ltd.
- South East Asian Bank Ltd
- Standard Bank (Mauritius) Limited
- StandardCharteredBank (Mauritius) Limited
- State Bank of Mauritius Ltd.
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- The Hong Kong and ShanghaiBankingCorporation Limited
- The Mauritius Commercial BankLtd.
All banks are nicely capitalized and profitable, with low yield loans accounting for 2.6 per cent of all loans in June 2009.
The banks appear to be in a good position despite the crisis and
currently hold few toxic assets (thanks to the fact that the operations are
financed mostly by domestic deposits rather than interbank foreign borrowing),
maintaining almost a third of all liquid or near-cash asset deposits available.
It also has limited exposure to the equity holdings, and has foreign exchange
positions that provide some protection against currency exchange rate
The domestic Mauritian has complete access to savings accounts virtually and reasonable access to basic personal credit, but the financials are limited at a higher risk.
According to a survey conducted in 2009, there are 2,011 bank accounts per 1,000 adults in Mauritius, which is the highest density in Africa.
In addition, the business models are well developed and innovative. For example, the State Bank of Mauritius, Orange andEmtelhas recentlyenteredinto a partnership to offer advanced mobile banking services to their clients.
In order to improve the access of small and medium-sized enterprises (SMEs) to finance, the Government contributed approximately US $ 12 million for the creation of an SME fund.
This fund will enable SMEs to obtain loans from commercial banks,
with shareholdings of more than 10%.
Mauritiusis a fairly active country in the capital markets: 41 companies have already been added to the Stock Exchange ofMauritius(SEM), in addition to the mutual funds and treasury bills that are listed there.The institutional and technical infrastructure of the SEM is highly developed, but the market is characterized by the low volume of transactions and the low level of liquidity, characteristics of the economies of limited size.At the end of 2009, market capitalization was 171% of GDP, and the turnover ratio was 20% of average market capitalization.Like any other stock markets around the world, SEM has been suffered from the global financial crisis. The main stock index, SEMDEX, dropped by 42% in 2008 and this trend continued until early 2009 before recovery took place in the middle of the following year.
The fixed-rate market is fairly well developed.The Bank ofMauritius(BOM) frequently issues various state funds and, until April 2011, the country received a Baa2 rating for local and foreign currencies from Moody's.
In the past, the institutional entities issued different non-government bonds sold on SEM and the Mauritian OTC board, but the new issues have been limited following a revision of the tax policy on interest payments.
At the end of December 2009, no institutional bonds were on the
market. The secondary market was also quite active.
Access to bond markets is quite free; individual investors can buy government bonds through auctions, the stock exchange, treasury value specialists (SVT) or spot trading directly to the BOM, while the public can access the market through SVTs, banks and authorized brokers.
Nevertheless, the investor base is mostly dominated by commercial
banks, which accounted for 51 per cent of the market in June 2009.
The derivatives of the Mauritian market are developed, but the trading volume remains small and is generally composed of interest rates and derivative currencies.
Futures contracts with a maximum of 12 months are marketable and
moderately liquid.Trading is expected to increase after
the opening by the "GlobalBoardof Trade
Ltd"(GBOT) "of a derivatives exchange in 2010 or a series of
African derivatives is offered.
In 2007, the total amount of insurance premiums was equivalent to 4.1% of GDP.
In recent years, competition in the insurance sector has intensified, reflecting a struggle to regain market share, in the absence of large cyclone losses.
Premiums have fallen, and some sectors such as auto insurance, are now showing much lower net operating ratios.
However, the sector remains highly concentrated, with the three largest insurance groups accounting for about two-thirds of all industry assets.
The regulatory framework limits investments in foreign assets to 25 per cent of all assets for all insurance companies, with the exception of foreign life insurance and general insurance companies that can not engage in foreign investment.
Mauritius has a solid pension plan.
Many pension plans operate in the country and play an important role in the bond market.Among these institutions is the National Pension Fund (NPF) which, according to the latest figures, has assets estimated at around 21% of GDP.
More than a thousand funded occupational pension plans are present and play an important role in the fixed income market.
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