IFN Country Analysis – Mauritius

The Republic of Mauritius has long been considered an attractive home for Shariah compliant funds, and an offshore financial center option for Islamic investors, due to its favorable tax regime. NESSREEN TAMANO writes an overview of the country’s Islamic finance and banking industry, which has seen demand grow in the last few years, particularly from its 1.27 million-strong Muslim community (making up 17% of its total population).

Regulatory landscape
The Banking Act of Mauritius was amended in the late 2000s to accommodate Islamic banking through a fully-fledged Islamic bank or an Islamic window. Non-bank deposit-taking institutions were allowed to accept Shariah compliant deposits as well.

The Bank of Mauritius became a member of the IFSB in 2008 and a founding member of the International Islamic Liquidity Management Corporation in 2010. The central bank also issued guidelines for businesses carrying out Islamic banking and financing, including a requirement to appoint a Shariah advisory board or a Shariah scholar, around the same time.

In 2009, legislation was passed to empower the Mauritian government to issue sovereign Sukuk to finance national projects, and subsequently, the Mauritius Revenue Authority issued a Statement of Practice on the value-added tax implications of Murabahah transactions. Mauritius also imposed AAOIFI’s financial accounting standards as a mandatory regulatory requirement.

Banking and finance
HSBC Amanah launched the first Islamic window in Mauritius in 2009, immediately after the issuance of Islamic banking guidelines, but it ceased operations three years after.

Century Banking Corporation (CBC), established in 2011 as a joint venture between British American Investment Company (BAIC) and Domasol, was the first and only fully-fledged Islamic bank in the country for almost a decade. However, the central bank revoked its Islamic banking license in September 2020 after it failed to remedy breaches in banking laws, including capital requirement, internal control systems, anti-money laundering and combating the financing of terrorism and record-keeping.

Habib Bank remains the only bank in Mauritius licensed to conduct Shariah compliant operations through an Islamic window, which it started in 2014, but the bank has very limited product offerings. Meanwhile, Al Barakah Multi-purpose Co-operative Society offers financial services and products to the country’s Muslim community.

In 2020, the new Finance Bill included a provision allowing for the establishment of Islamic digital banks, and the National Budget 2020/2021 included plans to introduce new financial products including a debut Sukuk issuance from the central bank. These have yet to materialize.

In the Takaful sector, Mauritius Union Assurance Company is the only insurer that offers Islamic coverage. British American Insurance used to also offer Takaful, before it was seized and shut down by the government following allegations of its parent company BAIC’s involvement in a Ponzi scheme.

Asset management
The island nation has the unique advantage of being an offshore financial center, which holds great opportunities for an Islamic asset management sector to flourish.

In addition, a framework within the Financial Services Act complemented by the Securities Act supports Shariah compliant mutual funds, private equity funds, asset managers and investment advisory entities to run operations in Mauritius, parallel to their conventional counterparts.

HSBC Bank’s wealth management unit launched its Shariah Global Equity Fund in the local market in 2012, and was followed by CBC’s Century Shariah Fund. In 2019, South Africa-based Skybound Capital launched its Shariah Trade Finance Fund, announcing that it is to be co-managed by Saudi Arabia’s Derayah Financial.

Also in 2019, SBM Capital partnered with Malaysia’s CIMB-Principal Islamic Asset Management Group and added the Islamic ASEAN Equity Fund and Global Sukuk Fund to its portfolio of products.

Alteia Fund Management in 2023 announced its plans to expand into the GCC, and its growth strategy in the next three to five years, which includes a special focus on Shariah compliant and ESG offerings.

Outlook
Although Mauritius has a dedicated framework supporting Islamic finance and banking, the industry has faced many challenges, and the shutdown of its lone fully-fledged bank and Islamic financial institutions (at different points in time) has not been encouraging for other existing and potential market players. Still, stakeholders remain hopeful, as an inaugural Sukuk issuance seems forthcoming and interest in Islamic investment in the country continues to grow.