IFC

A New Direction

Mauritius is taking a fresh look at its financial services sector as it strengthens its profile as financial hub with easy access to Africa, Asia and beyond.

Mauritius is poised to take market share from its global finance centre rivals as it aims to offer a broader range of financial services and attract international companies to set up operations on the island. Over the past decade its finance centre has grown due to its strong links with India, however, the country is no longer satisfied to be only an investment conduit. Mauritius is not an offshore centre but one of substance, say the island’s professionals and service providers, stressing that Mauritius was among the first jurisdictions to be included in the OECD white list. While historically most work has been corporate driven, the island is currently strengthening its capital markets and wealth management sectors.

A Broad Range

Mauritius’ financial ecosystem has evolved considerably in recent years. Initially, establishing itself as a banking hub, the finance sector quickly diversified and today is home to more than 20 banks, some 20,000 global business companies and almost 1,000 global funds, with investors coming mainly from the US, Europe and Asia targeting African and Asian markets. In addition, Mauritius boasts a well-developed insurance sector offering insurance, reinsurance, captive business and private pension. The world’s largest reinsurance company, Munich Re, has a presence in Port Louis, while international banks such as Barclays, Standard Chartered and HSBC have long been operating from the island and have been joined by international law firms and trust companies. Mauritius also stands as one of the largest and most innovative capital raising markets of the African landscape. The finance sector contributes more than 10% to the island’s GDP and employs around 13,000 people.

“We are looking at developing new activities in our financial centre. These include captive insurance business, a new derivatives platform to allow the hedging of risks and exposure on African currencies, a new spot commodities platform for the trading of gold, rough diamonds and other precious coloured stones, as well as international legal services and investment banking activities.”

Roshi Bhadain, Minister for Financial Services, Good Governance, Institutional Reforms, Technology, Communication and Innovation

Transparent Relations

As the global taxation landscape is changing like never before, Mauritius stresses it is no place for financial secrecy. Its financial services industry embraces the highest standards of international practice and fully supports international initiatives aimed at combating money laundering and illicit transactions. The industry is closely regulated, with the Financial Services Commission (FSC) acting as the regulator for non-banking financial institutions while the Bank of Mauritius (BOM), the Central Bank, regulates the banking sector. Both the FSC and the BOM take their supervisory functions very seriously. In 2015, the authorities acted quickly when one lender was suspected of foul play and had its licence revoked. The FSC also applies a risk-based supervision system, which has both on-site and off-site compliance elements, aimed at detecting irregularities at an early stage.

“The financial services centre is re-thinking its development strategy to serve Africa needs for capital and business services. We have a vision to develop Mauritius as a thriving hub for business and financial services in the region. We are putting in more substantive activities in our financial services centre, and are moving away from a business model that relies predominantly on fiscal arbitrage.”

Vishnu Lutc hmeenaraidoo, Minister of Finance and Economic Development

Opportunity Areas

Mauritius’ finance sector has made significant inroads in the African capital markets sector. The island now boasts two stock exchanges, which complement each other. The Stock Exchange of Mauritius operates two markets: the Official Market and the Development & Enterprise Market (DEM), while the Bourse Africa provides a modern technology platform for international derivatives trading, commodities and currencies. Banks and service providers have also begun to embrace opportunities in private banking and wealth management and are seeking to service the increasing number of affluent Africans. The island is also pushing for the development of an integrated regional market, with the ultimate aim of establishing a ‘passport system’ for financial services allowing entities licensed in Mauritius to provide services in the Southern African region. Its appeal as a reliable finance centre and investment platform for Africa and Asia is attracting more companies to Mauritius. For instance, Bank of China recently announced the opening of a branch to support Chinese investors on the island and in the rest of Africa. Mauritius also believes there is scope to attract more anciliary services and is inviting international legal firms, investment advisors, consultancies and brokerage houses to set up on the island. Due to its robust regulatory environment and growing technology infrastructure, Mauritius is also being seen as an ideal location for fintech start-ups.

“A strong and well regulated financial sector is crucial for sustainable economic growth, but we also take the enforcement of regulations very seriously. We do not shy away from revoking banking licences if institutions do not comply with our high standards. We are a credible and transparent jurisdiction.”

Rameswurlall Basant Roi, Governor of the Bank of Mauritius

Sector Support

The ability to use its wide network of more than 40 double tax treaties has been instrumental in the development of Mauritius’ finance centre. The tax treaty with India, which made Mauritius the number one source of foreign investment into India and which dates back to 1983, exempts Mauritian-based companies from Indian taxes. However, the island’s professionals point out that there are a number of other benefits that Mauritius provides. It boasts the highest number of accountants per capita in the world, and its service providers are well versed in dealing with emerging markets in Africa and Asia. Mauritius has a very good legal system with the Privy Council in London being the highest court of appeal. In addition, Mauritius’ past and present governments have supported the finance sector and have gone in the same direction in respect of policy-making, which gives a lot of confidence to investors.

A New Horizon

Mauritius is well on its way of diversifying its finance centre. It has already transitioned its financial services offering from company formation and accounts filing into more sophisticated financial products and solutions. The challenge for the island is now to build up the required human capital to support the new activities. To widen its finance sector’s horizon and accelerate its development, Mauritius has set up a new promotional body, the Financial Services Promotion Agency (FSPA), in addition to creating a dedicated ministry, the Ministry of Financial Services, Good Governance, Institutional Reforms, Technology, Communication and Innovation. Mauritius’ financial sector does not exist in isolation; the island has the ambition to become a vibrant hub for business services and trade in the region. In this context, financial services companies can help fuelling the rapid development of Mauritius while gaining benefits in the process. With Mauritius acting as the gateway and investment platform into Africa, the expectation is that the finance centre will grow like it has never grown before.

“Our mission is to become a respected, reputable and sustainable regulator, and transform Mauritius into a competitive international finance centre. All our efforts in terms of regulatory development, risk management, capacity building and product diversification are geared towards this goal.”

P K Kuriachen, Acting CEO of the Financial Services Commission