The Maldives Monetary Authority (MMA) has invited interested parties to submit comments, views and suggestions on a consumer finance bill drafted by the central bank.
The bill is intended for “the purposes of providing for licensing of financial institutions to conduct consumer finance business in Maldives, policies for the operations of such institutions in a safe and prudent manner, supervision of such institutions and provision for other related purposes.”
Interested parties were asked to submit feedback on the draft legislation through email before June 15.
Consumer finance involves a variety of loans to individual consumers, including credit cards and mortgage loans from banks and credit unions as well as alternative lenders such as finance companies.
Earlier this month, CEO of the Capital Market Development Authority (CMDA) Fathimath Shafeega told Minivan News that the Maldives was “ideally placed” to become an international financial centre.
The country’s fledgling legal framework for the finance sector was both a strength and a weakness, she explained: “We don’t have regulations hindering a lot of things. 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.”
Shafeega also 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.
Strengthening the finance sector
Meanwhile, in a keynote address delivered at a finance forum held earlier this month, MMA Governor Dr Azeema Adam stressed the importance of an “efficient and modern financial sector” as well as access to finance for creating “a society of entrepreneurs.”
“To allow the financial sector to thrive, it is imperative that we have a well-developed legal framework,” she said.
“When the legal framework is fully developed, there would be timely enforcement of contracts, and the protection of investors’ rights. There would be legal instruments for recovering debt. There would be speedy settlement of commercial cases in the courts.”
She noted that the central bank was working with the government to introduce new legal instruments and to strengthen institutions, referring to the recently passed Anti-Money Laundering Act as “one such legislation that would safeguard the financial sector from criminal activities and enhance investor confidence.”
While the central bank has a “fairly robust financial sector regulatory framework,” Dr Azeema said the MMA was in the process of reviewing existing regulations to identify constraints to the development of the finance sector.
“This will minimise the chances for the financial system to be burdened by unnecessary rules and unintended consequences,” she explained.
“International experience suggests that even a slight improvement in the legal and financial regulatory frameworks brings significant changes to the financial sector, enabling new financial products to emerge.”
She added that the financial services currently provided in the country should be expanded and modernised in order to attract investment.
“There is scope and indeed the need for increased competition in the financial sector,” she continued.
“The banking sector needs to be modernised. It is time that banks adopt 21st century tool kits in providing services to their customers. The banking sector has to become more competitive, and banking services need to be expanded. Non-bank financial services and capital market activities also need to be further developed in the country.”
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