James King<\/b><\/p>\n
Africa-Press – Mauritius. <\/strong><\/span>Mauritius’ reputation as a well regulated, safe destination for banking and business has suffered during recent corruption scandals, but such is the country’s strong reputation that these events do not seem to have adversely affected its ambitions to become an international financial centre.<\/p>\n As one of Africa\u2019s most globally integrated economies, Mauritius has weathered the strains of the post-financial crisis world relatively well. Though the slowdown in the eurozone \u2013 the country\u2019s main trading partner \u2013 has hit domestic growth prospects hard, a process of economic diversification towards Asian and African markets is now well under way.<\/p>\n Meanwhile, over the past five years, gross domestic product growth has averaged 3.5%, according to the World Bank. This represents a notable reduction from previous decades, in which annual growth ranged between 5% and 9%.<\/p>\n Yet, according to most sources in the country, it is a respectable performance in light of the prevailing headwinds in the global economy. For the most part, the recent growth story of Mauritius’ banks has come to mirror this slow yet steady pace of development.<\/p>\n Data from the Bank of Mauritius\u2019 latest financial stability report indicates that return on assets for the sector as a whole, including foreign-owned subsidiaries, increased to a modest 1.4% in September 2014, up from 1.0% a year earlier.<\/p>\n Meanwhile, total assets increased by 8.5% over the same period. This positive momentum was largely generated by the overseas operations of both domestic and foreign lenders.<\/p>\n Yet this muted growth environment has not been entirely benign. Domestic private sector credit demand has lagged over the past few years, partly contributing to a build-up of liquidity in the banking system.<\/p>\n According to research from Mauritius Commercial Bank (MCB), the country\u2019s largest lender, these conditions have put downward pressure on the overall weighted yields linked to treasury bills, while heightening competition in certain customer segments and leading to diminishing interest margins.<\/p>\n Future growth As a result of the competitive domestic market, a number of lenders are now looking to Africa and Asia for their future growth. Many are in the midst of expanding their existing presence in key markets, while others are on the hunt for fresh acquisitions.<\/p>\n Nevertheless, this geographic expansion is coming at a cost as some of the country\u2019s larger banks have suffered notable, though manageable, setbacks in their push beyond the domestic frontier. Meanwhile, Mauritius\u2019 banking sector is still emerging from a string of corruption scandals.<\/p>\n With two of the country\u2019s lenders, Mauritius Post and Cooperative Bank (MPCB) and Bramer Bank, now known as the National Commercial Bank, requiring government intervention following allegations of serious corruption and mismanagement, Mauritius\u2019 financial services sector\u2019s usually clean reputation has taken a hit.<\/p>\n Nevertheless, positive changes are taking place. The victory of the three-party coalition, the Alliance Lepep led by Anerood Jugnauth, in the December 2014 general election brought an end 10 years of former prime minister Navin Ramgoolam\u2019s rule.<\/p>\n With it have come ambitious plans to reinvigorate Mauritius’ economy, and a promise to vigorously stamp out corruption and pursue greater transparency.<\/p>\n To this end, the new government has kept to its word. In February, Mr Ramgoolam was arrested on suspicion of conspiracy and money laundering, charges denied by the former prime minister.<\/p>\n In tandem, business leaders from across the country are speaking of a new zeal by regulatory bodies in enforcing the high levels of transparency and compliance for which the Indian Ocean island is normally known.<\/p>\n \u201cThe new government\u2019s drive towards transparency is being welcomed by the private sector,\u201d says Paul Orian, chief executive of Warwyck Private Bank, one of the country\u2019s first standalone private lenders.<\/p>\n Large-scale task For a jurisdiction with one of the most advanced and progressive business environments in the world, the scale of the task facing the authorities in Mauritius is surprisingly large.<\/p>\n In early 2015, the Bank of Mauritius revoked the licence of Bramer Bank, a unit of British American Investment (BAI) Group, an investment holding company, concluding that the lender had been carrying out its business in a manner \u201c. Yet, according to senior banking figures on the ground, the BAI group was shifting assets between its various business units, including Bramer Bank, as well as the group\u2019s insurance subsidiary, in an effort to provide inflated performance figures.<\/p>\n This included Bramer Bank\u2019s holdings of public deposits, which left the bank in a challenging liquidity position and in need of overnight lending from the Bank of Mauritius for nearly a month in the run up to the bank\u2019s closure.<\/p>\n Since the lender\u2019s licence was revoked in April this year, Bramer Bank\u2019s assets and liabilities have been transferred to a new, wholly state-owned entity called the National Commercial Bank.<\/p>\n The government has also provided support to the nearly 23,000 clients of Bramer Bank who have been hit by the crisis, according to local press reports.<\/p>\n \u201cKey entities operating under the aegis of British American Investment have been subject to major corrective actions by the authorities. The full scale and potential implications of such instabilities remain to be conclusively established and evaluated.<\/p>\n [Nevertheless], the banking institution \u2013 formerly named Bramer Banking Corporation \u2013 represents only a small share of the banking industry as a whole,\u201d says Antony Withers, the chief executive of MCB.<\/p>\n Under fire In addition, MPCB has come under fire for allegedly providing unsecured loans to local business figures with high-level links to Mauritius’ previous ruling administration.<\/p>\n Earlier this year, government authorities determined that the lender had failed to report non-performing loans (NPLs) to the value of MRs1.7bn, of which MRs800m was provided to one politically well-connected individual.<\/p>\n \u201cLike any bank, we have NPLs. We are a bank with policies, procedures and good controls in place. Unfortunately, some of our larger domestic corporate accounts turned non-performing,\u201d says a source from MPCB.<\/p>\n Since winning the election, the new government has removed the senior management team of MPCB and, at the time of writing, new personnel were in the process of being appointed.<\/p>\n In addition, the bank’s former chief executive, Rajiv Beeharry-Panray, was detained by police and provisionally charged with conspiracy to defraud and a breach of the Banking Act in July, according to local press reports.<\/p>\n This action has been accompanied by a MRs500m capital injection, allaying fears across the country that the bank was facing a potential closure. \u201cBoth the governor of the Bank of Mauritius and the minister of finance have given assurances that there was never any risk of the bank closing,\u201d says the MPCB source.<\/p>\n For now, the bank is looking to overcome these recent hurdles by focusing on plans for future growth. \u201cWe are very confident we have a good business plan and strong capital base moving forward,” says the source.<\/p>\n Limited repercussions The extent to which these scandals will impact on Mauritius\u2019 ambitions to become a major financial hub is expected to be limited.<\/p>\n Both incidents largely occurred under the previous administration, and are anticipated to have limited repercussions for the health of the financial services sector at large.<\/p>\n \u201cThough Mauritius\u2019 reputation has been hit by recent scandals, I think this will be quickly forgotten. Mauritius has the distinction of not letting a single depositor lose money in its history, despite the absence of a deposit protection fund.<\/p>\n In the case of Bramer Bank, the impact to the financial system has been minimal, while the bank\u2019s depositors have been covered by the government,\u201d says Ravneet Chowdhury, chief executive of Bank One, a Mauritian lender established in 2008. Moreover, the new administration has been widely praised for its swift and effective response to these scandals.<\/p>\n Among the country\u2019s financial services players, most agree that Mauritius\u2019 underlying investment proposition, coupled with its regulatory and business environment, will offer sufficient pull to investors in the future, despite this recent turbulence.<\/p>\n \u201cMauritius\u2019 regulatory structure and market opportunity are inherently attracting investors to come here. We\u2019re well positioned as a bank to gauge the country\u2019s rise as a financial hub.<\/p>\n Every day we have delegations from Kenya, Nigeria, South Africa, Europe and beyond who are using Mauritius as an investment and operating platform to do business in the region,\u201d says James Benoit, chief executive of Port Louis-based AfrAsia Bank.<\/p>\n Financial centre hopes In this respect, the authorities are pushing hard to position Mauritius as a financial centre. In 2014, the central bank issued two new licences for private banks in order to deepen the financial services sector\u2019s capacity.<\/p>\n Crucially, these players \u2013 Warwyck Private Bank and Banque Privee\u0301 de Fleury \u2013 represent the first standalone private banks to be issued licences in Mauritius.<\/p>\n \u201cBoth the government and the Bank of Mauritius are very keen to develop different areas of banking.<\/p>\n The plan is to have a range of players who can offer the full spectrum of banking services that would support the vision of turning Mauritius into a proper financial services centre,\u201d says Mr Orian at Warwyck Private Bank.<\/p>\n This push to develop a private banking industry in the country has come at a favourable moment for Mauritius, according to Mr Orian. \u201cSome of the larger global private banks are asking their smaller clients to take their business elsewhere.<\/p>\n These customers are now coming to Mauritius because they are comfortable with the country\u2019s operating model, and they are looking for new private banking relationships,\u201d he says.<\/p>\n As this process of financial deepening gathers pace, Mauritius\u2019 already-crowded banking sector of 23 licensed lenders \u2013 in a country of 1.3 million people \u2013 is expected to become even more competitive.<\/p>\n Yet most bankers remain optimistic. \u201cMauritius could handle double the number of banks if these additional lenders focused on wider regional opportunities.<\/p>\n The more capital and liquidity we have in Mauritius, the more people will want to operate in the country because they know that there\u2019s a choice and that there\u2019s substance to the financial services sector,\u201d says Mr Benoit.<\/p>\n Success stories For such a competitive sector \u2013 and one in which the top four banks account for about 56% of total assets \u2013 more recent entrants to Mauritius’ commercial banking space are still finding success.<\/p>\n ABC Banking Corporation, established in 2010, and part of the wider Port Louis-based ABC Group conglomerate, has carved a niche for itself in the intervening years.<\/p>\n \u201cDuring the first two years of operations we had to absorb a fair amount of loss. Yet, by 2013 we had reached MRs5.9m of profit after tax.<\/p>\n Last year this figure hit MRs15.1m, and we expect an impressive increase for the 2015 financial year,\u201d says Donald Ah-Chuen, managing director of ABC Banking Corporation.<\/p>\n Similarly, Bank One, a private lender established in 2008, has ambitious plans to target the saturated retail market. \u201cThere is space in every industry and every market if you can get the formula right.<\/p>\n The Mauritian banking sector\u2019s retail market is ripe for a shake-up. We want to double our market share in this space over the next few years. In terms of the domestic market, we see the youth demographic as a strong growth prospect.<\/p>\n We\u2019re currently putting together a long-term strategy to tap into this opportunity,\u201d says Mr Chowdhury, the bank’s chief executive. Nevertheless, the clear trend for most Mauritian banks is to look to sub-Saharan Africa and south Asia as the go-to destinations for longer term growth.<\/p>\n MCB\u2019s foreign-sourced income accounted for 42% of total profits. Similarly, 60% of AfrAsia Bank\u2019s balance sheet assets are located outside of Mauritius.<\/p>\n \u201cIn some ways I see Mauritius mirroring the development of Singapore, which successfully tapped into a rising entrepreneurial class as part of its growth story.<\/p>\n A lot of wealth generation in Africa is occurring from first-generation entrepreneurs, and they want holistic bankers who can understand their companies and give them good investment advice,\u201d says Mr Benoit.<\/p>\n ACQUISITION OPPORTUNITIES This is in addition to its recently securing a full subsidiary licence for its operations in India, allowing it to open branches in any location at any time.<\/p>\n \u201cThe domestic banking market has matured and it is time to explore new opportunities.<\/p>\n The Reserve Bank of India has recently granted us a full subsidiary licence for our Indian operations, allowing SBM to open branches across the country.<\/p>\n We intend to develop 100 branches over the next two years,\u201d says Jairaj Sonoo, chief executive of SBM. \u201c[In Africa], we plan to use Kenya as a hub for our operations, while pursuing acquisition prospects in a number of markets across the region.<\/p>\n We chose east Africa because many of our corporate clients are also pushing into the region, and it generally shares a similar legal and regulatory framework to that of Mauritius. With subsidiary operations across Madagascar, Mozambique and the Seychelles, as well as representative offices in Johannesburg and Nairobi, MCB has an eye to the continent for its long-term growth.<\/p>\n \u201cAs recognition of the key role that MCB plays in supporting regional economic development, the African Development Bank recently granted the bank a financing facility of $150m.<\/p>\n This package is designed to assist the group in increasing foreign currency lending, extended to medium- and large-sized businesses operating in Mauritius, neighbouring countries and Africa,\u201d says Mr Withers.<\/p>\n \u201cGoing forward, MCB is intent on furthering its regional diversification strategy, with the African region remaining the key target in view of its generally appealing economic prospects,\u201d he adds.<\/p>\n Source: Thebanker<\/b><\/p>\n For More News And Analysis About Mauritius<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" James King Africa-Press – Mauritius. Mauritius’ reputation as a well regulated, safe destination for banking and business has suffered during recent corruption scandals, but such is the country’s strong reputation that these events do not seem to have adversely affected its ambitions to become an international financial centre. As one of Africa\u2019s most globally integrated […]<\/p>\n","protected":false},"author":84,"featured_media":36039,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,6,7],"tags":[233,245,350,241],"class_list":["post-36040","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-files","category-head-lines","tag-africa-press","tag-africa-press-mauritius","tag-international","tag-mauritius"],"yoast_head":"\n
\n. detrimental to the interests of depositors and the public\u201d. Speaking to the press in April this year, Mr Jugnauth claimed that government investigators had uncovered a Ponzi scheme valued at MRs25bn ($706m). It should be noted, however, that evidence of these claims has not been released while investigations are still under way.<\/p>\n
\nThe country\u2019s second largest bank, the State Bank of Mauritius (SBM), is now actively pursuing acquisition opportunities in east Africa.<\/p>\n
\nMeanwhile, MCB, which has had a strong presence across sub-Saharan Africa for a number of years, is also looking to advance its footprint across the region.<\/p>\n