Bheenick criticizes sluggish efforts in developing Islamic banking in Mauritius
The central bank is trying to develop Islamic banking with its own initiatives while taking into consideration religious principles such as bans on interest payments and pure monetary speculation. (Image: Central Banking)
Mauritius central bank governor criticized the lack of efforts to cash on the rising trend of Islamic banking in the financial sector, which may stand in the way of the island economy becoming a regional financial hub.
In an annual letter addressed to stakeholders, Governor Rundheersingh Bheenick said that introducing financial tools such as sukuk, Islamic bonds, will allow the island economy to attract more investments from cash-rich Islamic funds in 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.
Without mentioning anyone, the governor expressed frustration with the fact that there has been no improvement in Islamic finance because of difficulties in securing enabling legislation and a “key player” has not done any effort to facilitate this.
Since joining the central bank in 2007, Bheenick has promoted Islamic banking and now says he feels confused by such foot-dragging on finding ways to increase the safety of the banking and financial system.
Earlier, the central bank and the finance ministry faced a rift in their relations over interest rate levels on the Indian Ocean Island, and, in response to this, in his open letter to shareholders, the governor also suggested more independence for the monetary policy committee.
Besides, Bheenick added that in 2008, Mauritius amended its law to allow the government to raise money through sukuk. However, despite calls by the central bank to implement this, the public debt issuance calendar has never provided for them.
“This severely compromises the prospect of our jurisdiction playing a bigger role in the growing world of international Islamic finance,” Bheenick added.
The central bank is trying to develop Islamic finance with its own initiatives while taking into consideration religious principles such as bans on interest payments and pure monetary speculation.
Bheenick stated that a sharia-compliant liquidity management tool based on commodity murabaha, a common financing structure in Islamic banking, is in its final stages of development. This is in line with the role of the Mauritius’ central bank 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.
Bheenick added without naming the bank that, at the end of last year, an application for a licence was received from an established bank in Mauritius to operate a window for Islamic business. Prior to this, Century Banking Corp came into operation in 2011 as Mauritius’ first full-fledged Islamic bank.
Finally, it is anticipated that the industry will receive a boost this year when the island hosts the annual summit of the Malaysia-based Islamic Financial Services Board in May.