| March 5
March 5 The central bank governor of Mauritius
has publicly criticised delays in the island's efforts to
develop Islamic finance, saying such "foot-dragging" could
deprive the financial sector of chances to grow and increase
Governor Rundheersingh Bheenick said in an annual letter to
stakeholders that legislation was needed to boost the financial
industry. The country is trying to diversify its economy beyond
tourism and textiles.
Fewer than a fifth of the island's 1.3 million people are
Muslim, but introducing financial tools such as sukuk (Islamic
bonds) could help to attract investment from cash-rich Islamic
funds in the Gulf and southeast Asia.
"I must concede that we still have to cover some ground to
de-risk our financial system and add depth to the financial
market...The introduction of sukuk and cross-border resolution
are some of the areas where we are trailing well behind,"
Bheenick said in his letter.
The slow progress is due mainly to difficulties in securing
enabling legislation, and a "key player" has not changed its
behaviour to facilitate this, Bheenick said without naming the
target of his criticism.
"I am mystified by such foot-dragging on initiatives
designed to increase the safety of our banking and financial
system," said Bheenick, who has promoted Islamic finance since
joining the central bank in 2007.
The open letter, in which the governor also called for more
independence for the monetary policy committee, comes weeks
after a rift emerged between the central bank and the finance
ministry over interest rate levels on the Indian Ocean island.
Mauritius amended its laws in 2008 to allow the government
to raise money through sukuk, but the public debt issuance
calendar has never provided for them, despite calls by the
central bank for it to do so, Bheenick added.
"This severely compromises the prospect of our jurisdiction
playing a bigger role in the growing world of international
To the extent possible, the central bank is pushing ahead
with its own initiatives to develop Islamic finance, which
follows religious principles such as bans on interest payments
and pure monetary speculation.
A sharia-compliant liquidity management tool based on
commodity murabaha, a common financing structure in Islamic
banking, is in its final stages of development, Bheenick said.
This is in line with the Mauritius central bank's role as a
founding member of the Malaysia-based International Islamic
Liquidity Management Corp, a body backed by central banks from
the Middle East, Asia and Africa.
An application from an established bank in Mauritius for a
licence to operate a window for Islamic business was received at
the end of last year, Bheenick added without naming the bank.
Century Banking Corp, Mauritius' first full-fledged Islamic
bank, opened its doors in 2011.
The central bank expects a further boost to the industry
later this year when it hosts the annual summit of the
Malaysia-based Islamic Financial Services Board in May.
(Editing by Andrew Torchia)