The Republic of Mauritius, whose Muslim population makes up 17% of the total population of 1.27 million, is known for its popular tourism industry and for being an offshore financial center option for Islamic investors. However, the country’s Islamic finance and banking sector still has a long way to go before it can call itself a Shariah finance regional hub. NESSREEN TAMANO writes.
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 (BOM) 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, a 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 later.
Century Banking Corporation (CBC) was the first and only fully-fledged Islamic bank in the country for almost a decade, having opened in 2011 as a joint venture between British American Investment Company (BAIC) and Domasol. However, the central bank revoked its Islamic banking license in September 2020 after it failed to remedy breaches of 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 it has very limited product offerings.
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 for the introduction of new financial products including a debut Sukuk issuance from the BOM.
In the Takaful sector, MUA 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.
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 said it would be launching its Islamic Trade Fund, to be co-managed by Saudi Arabia’s Derayah Financial.
Although Mauritius has a dedicated framework supporting its Islamic finance and banking industry, the shutdown of its lone fully-fledged bank, along with other Islamic financial institutions at different points in time, has marred the reputation of the sector. Industry players remain hopeful that an inaugural Sukuk issuance is forthcoming, and would set in motion a series of developments that will push Shariah finance forward.
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