CEO of the Capital Market Development Authority (CMDA) Fathimath Shafeega believes the Maldives to be “ideally placed” to play the role of an international financial centre.
Describing the country as strategically well-placed, the head of the independent regulatory authority noted that the country’s nascent financial framework was both a weakness and a strength.
“We don’t have regulations hindering a lot of things,” noted Shafeega. “We can start from a clean slate.”
“But parliament needs to be very much involved in it. We might need to provide the software – laws and regulations and other policy frameworks – while investors can bring the hardware.”
Senior members of both the previous and the current administration have considered the development of offshore banking services as a way to diversify an economy heavily reliant on tourism.
“It’s very much still on the agenda,” said Shafeega.
Shafeega spoke with Minivan News following the release of the CMDA’s first quarterly report in 2014, which revealed the authority’s work this year had focused on drafting legislation to further modernise the market, as well as amending the Corporate Governance Code in order to increase gender diversity on the boards of publicly listed companies.
Islamic Finance
Established by the Maldives Securites Act in 2006, the CMDA’s quarterly report for the first time included details of the Islamic Capital Market – an area the report describes as having an “ever-green future in the Maldives”.
Indeed, Shafeega argued that the successful establishment of an Islamic Capital Market – featuring Shariah compliant financial products – would also add to the Maldives appeal as a future financial hub.
Introducing the quarterly update on the Islamic Capital Market development, Deputy Islamic Minister Dr Aishath Muneeza, argued that there was now a “global movement towards the creation of financial transactions based on underlying activities or underlying assets.”
“Relying on real economic activities has been the success secret of Islamic finance and now we are being forced to find innovative ways to adopt this method,” said Dr Muneeza.
Under Islamic Shariah, any risk-free or guaranteed rate of return on a loan or investment is considered riba, which is prohibited in Islam.
Also chair of the Capital Market Shariáh Advisory Council (CMSAC), Dr Muneeza this quarter became the first person granted Shariah advisor registration status in the Maldives.
CMSAC was created in December 2013 in order to advise the CMDA on the development of an independent Islamic Capital Market.
The council’s activities this quarter included the formulation of a five year plan to increase the availability of Shariah compliant services, raise awareness of Islamic finance, and establish an Islamic Finance Centre in the Maldives.
Writing for the Islamic Finance News website in March, Dr Muneeza described Islamic Finance as “spreading like wildfire” since the introduction of Islamic banking and capital market services in 2011.
“It is hoped that in the upcoming years the Maldives can be used as a global case study to prove the success of Islamic finance,” she wrote.
Pensions
Shafeega also expressed confidence that the state pension fund – for which the CMDA plays a supervisory role – can soon successfully diversify its investment portfolio.
“As you know the pension system in Maldives has assumed that there will be a developed capital market. The development of the capital market has not kept pace with the pension development.”
Beginning in March this year, the government more than doubled the monthly pension – with individuals aged over 65 now receiving MVR5000.
The government had allocated MVR470 million (US$30.5 million) in the state budget to give out an MVR2,300 (US$149) in cash handouts, with head of the Cabinet’s Economic Council Ahmed Adeeb stating that “innovative” investment would prevent the need to divert funds from within the current budget.
The CMDA quarterly report noted that research had been carried out in order to ascertain potential avenues for investment beyond government or listed securities – the only options currently utilised.
“For the pension fund to be able to generate a good return for the members, we need to diversify the pension investment,” Shafeega told Minivan News.
“We need to find alternative investment that can generate a good return”
Shafeega also expressed confidence that the additional revenue could be realised, revealing that – following the authority’s recommendations – the government was planning to introduce changes to the Pensions Act during the 18th Majlis.
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Ideally placed?
Er... Really?
Don't let the seykustanis know the core activities of financial centres. The Maldivian giant killer-bees might just be provoked into mindless furor by words like transactions, interest, balances, conversions...
Pure comedy! Nobody in their right mind would purposely keep money in this country! (hence the USD shortage) Gayoom and company can seize anything they want in the name of "national protection". Not exactly the kind of stable economic/political environment that encourages investment from the world's elite class. I think they'll stick with Switzerland, random Caribbean islands, etc. The level of delusion here is mind blowing if these people actually believe the fairy tales they're selling.
A country that has no justice system is no place to be a centre for finance on the international stage. Where do you dig up these people?
@Andrew: That's exactly what they mean. With no checks and balances, or transparency, this place is a haven for drug traffickers, child porn dealers and slave traders and their dirty transactions. Don't be surprised if some of the missing girls in Nigeria turn up here.
“We don’t have regulations hindering a lot of things,” noted Shafeega.
And don't worry. The giant killer bees will stay quiet as long as they get a cut of the proceeds.
HAHAHAHAHA
Fathimath needs to see a shrink because she is suffering from delusions, poor woman.
What in god's name is Islamic Capital Finance?.....is it the reason rich arabs and muslim despots prefer to stach their ill gotten gains in Geneva, London and Paris?
Suggest you stick to tuna fishing poppets.
To the commentors above: If offshore banking centers a silly idea really? Its tried, tested and it works precisely because laws differ internationally. Sure there are challenges with the legal system here but its sad that u attack the people who are trying to lead by offering technical solutions, not talking hot air, like carbon free by 2020 or drilling for oil.
The lack of investment banks and investment firms resulted the lack of young entrepreneurs in Maldives. I have faced several young entrepreneurs who have developed their business plan after a 10-15 years education and seeking finance for their project for the rest of their life.
Overseas private investors reject these entrepreneurs due to misbehaved ministers and parliament members in this country.
ha ha ha, looks she out of her mind, you have sharia law in your country, but want to make it a financial center, who the hell is going to answer to allah for the usurious intrest collected, you a thousand years behind, by that time maldives is going to sink, and before that if you by chance become a financial center the money brought in is going to sink your little islands with its weight. so forget it and look for somethng better u good at