Maldives plans to be an international centre of Islamic finance in 2018

By P.K. Balachandran

The Maldives has plans to become an international financial player, laying the groundwork to become an international centre of Islamic finance amid efforts to diversify the country’s income and investment streams, according to Maldivian Finance Minister Ahmed Munawar.

Munawar was quoted by website Maldives Global FDI Reports as saying that one of the main strategies of the Government of Abdulla Yameen was to make the Maldives a centre for Islamic finance.

Since starting operations in 2011, the Maldives Islamic Bank has become one of the country’s fastest-growing financial institutions, and the Government has sought the assistance of the Islamic Development Bank (IDB) in drawing up an adequate regulatory framework, the website said.

Additionally, the Government-owned Maldives Centre for Islamic Finance contributes through policy development and by promoting product innovation. 

“We believe that, since the Maldives is not only an Islamic country but also very active in this area, we have the right ingredients and we can make legislative changes very quickly to accommodate Islamic financing,” stated Munawar.

The Minister noted that Islamic banks and portfolios were growing rapidly in the country, and that the Bank of Maldives had opened an “Islamic window” to create healthy competition with the Maldives Islamic Bank.

“Before the end of this year our goal is to launch domestic sukuks – Islamic bonds – in the Maldives,” he said.

The regulatory framework for the sector as a whole should move from draft form to law next year, the Minister added. 

Overall economic landscape

In 2017, the Maldives became one of the world’s smallest nations to receive credit ratings from Moody’s and Fitch. Both prestigious agencies commended the country on its deficit reduction, economic growth, infrastructure investment and political stability, rating the country with a stable outlook.

“‘Maldives also demonstrates strong debt affordability metrics due to a large revenue base and a well-funded banking system,’ says the second Moody’s report on the Maldives, from September 2017,” said Finance Minister Munawar. 

After receiving its first-time credit rating, the Maldives issued its first sovereign bonds, an oversubscribed tranche of $ 200 million, in June. Now the country’s banks and financial institutions are gearing up for a new, more globalised era. 

“We see a great deal of potential for investment from GCC countries and discussions have already started on further potential bond issuances. 

At the same time, the Government is devoted to maintaining open regulations to encourage foreign investment. There are no capital controls, long leases are available on properties and special incentives for investors who are able to reclaim land,” Munawar said.