Bank of Maldives Plc began offering Shari’ah-compliant retail deposits on 22 January and promised that retail and commercial loans would follow within two years.
Speaking to Bloomberg, Deputy Minister for Islamic Affairs Aishath Muneeza said that the new offering will help drive an increase in Shari’ah complaint financial assets to five per cent of holdings this year from three per cent.
“The growth of Islamic finance will be at a very fast pace,” she said. “I hope that we will be able to create an Islamic finance centre, which will act as the leader for Islamic finance and the Halal industry in the South Asia region.”
The first Islamic bank in the country, Maldives Islamic Bank (MIB) opened in March 2011 with capital of MVR 150 million ($12 million), operating both a consumer and a corporate unit. At the time, CEO Harith Harun said that there was a strong demand for Islamic banking services in the country.
The Government has since established a Shari’ah advisory board and laid the regulatory groundwork for Sukuk investment. According to Bloomberg, the tourism-dependent island nation is looking to diversify its economy by luring Islamic debt sales and deposits from India, where there is a Muslim population of 166 million but no Sukuk or Shari’ah lenders because of opposition from Hindu politicians.
“What the Maldives has going for them is the fact that they’re not as regulated as Sri Lanka or Pakistan,” Baiza Bain, a Director at Islamic finance consultancy Amanie Advisors Pty Ltd., told Bloomberg. “They are more nimble in that sense compared to their bigger rivals in South Asia.
“Maldives has taken the positive step in terms of issuing the initial regulations but what they need to do is attract one of the major players. If you have one of the big banks set up operations there, that alone will be a very positive reinforcement for other banks to consider setting up a presence,” Baiza said.
The Maldives Monetary Authority began selling Shari’ah-compliant treasury bills in 2013 and in the same year, the Housing Development Finance Corporation Plc sold the first Shari’ah compliant bonds. The Government has also been keen to develop the Halal sector, particularly in fish exports.