2021 can best be described as a year of hope and recovery from the coronavirus pandemic. Like all other countries in the world, the Maldives is faced with challenges in managing the COVID-19 crisis. Due to the pandemic, the Maldivian finance industry adopted various new innovative ways to manage the unprecedented circumstances by adopting technology to provide financial products and services in a socially distant manner. For instance, in 2020, the central bank, Maldives Monetary Authority, made it compulsory for financial institutions to provide debt moratoriums, resulting in Islamic and conventional financial institutions needing to find innovative ways to implement the moratoriums without having customers physically submitting an application.
In this regard, Maldives Islamic Bank (MIB), the only fully-fledged Islamic bank operating in the Maldives, introduced the ‘Moratorium Portal’ and a new website was launched in 2020 with a unique interface with online bank account opening features. As such, it is not wrong to state that the pandemic has provided the Maldives with the opportunity to escalate the integration of the finance sector with technology and innovation to continue doing business without a physical presence.
It was disclosed on the official website of the Housing Development Finance Corporation (HDFC) that 71% of their customers were adversely affected by the pandemic where 64.04% of them applied for a debt moratorium and 96.28% of the applications were approved with 19.49% baing customers of HDFC Amna.
Review of 2021
There were not many Islamic finance developments in 2021 in the Maldives, but the events that has happened definitely prove that Islamic finance is growing in the country. The most remarkable achievement in this regard in the Maldives was the issuance of sovereign Sukuk in the international market and the issuance of treasury bills based on the Ijarah structure.
Further, the HDFC issued its 4th Sukuk to the market using the same Shariah compliant structure which it used before. In terms of innovative financial product developments, the Islamic window of Bank of Maldives (BML) developed BML Islamic Home Improvement Financing and Islamic Home Improvement Finance Plus products where if the product is taken using the concepts of Musharakah Mutanaqisah (diminishing partnership) or service Ijarah (lease), then the customers are able to get cash.
Amana Takaful Maldives conducted its 10th annual general meeting virtually via the FahiVote platform powered by the Maldives Securities Depository and a total dividend of 15% was declared for 2020. The gross written premiums for 2020 stood at MVR127 million (US$8.12 million) and a 7% of reduction in performance from 2019 was seen.
In the same year, MIB launched a new online payment gateway called ‘MIB Global Pay’ powered by Mastercard. Unfortunately, during the year, though it was expected, SME Development Finance Corporation (SDFC) was unable to start its Islamic finance operations though the work toward it has begun.
Preview of 2022
2022 is anticipated to be a bright year for Islamic finance. The Maldives will resume work in the new normal and there will be more room for the exponential development of Islamic finance. It is anticipated that there will be more innovative financial products introduced in 2022 and hopefully SDFC would be able to commence its Islamic finance operations.
In terms of developments of the Islamic capital market, with the new second amendment to the Maldives Securities Act (Law No 2/2006), there will be room to introduce Islamic crowdfunding and other innovative types of Islamic capital market products and services that would pave the way to achieve financial inclusion via the Islamic capital market.
Though the Maldives is a 100% Muslim country, it does not mean that everyone knows about Islamic finance and how it works. The Maldives still needs to work on increasing Islamic finance literacy. In fact, it is imperative to conduct a national survey to find out where the country stands in this regard. For the sustainable development of Islamic finance in the country, a national strategic plan is required to be developed. It is hoped that with political will and support, Islamic finance can be taken to the next level in the future.