Tag: Capital Market Development Authority

New CMDA CEO appointed by President

President Abdulla Yameen has appointed Ahmed Naseer of Musthareege, Kaafu Atoll Maafushi to the post of CEO of the Capital Market Development Authority (CMDA).

According to a tweet from the presidential Spokesman Ibrahim Muaz, Naseer was was appointed to the post at the level of deputy minister. He previously served as a state minister at the Ministry of Finance and Treasury during President Mohamed Nasheed’s administration.

The position of CEO of CMDA was left vacant after the resignation of Fathimath Shafeeqa’s resignation from the post last month.

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Legal restrictions a challenge to investment expansion: Pension Office

The Maldives Pension Administration Office (MPAO) has said legal restrictions are preventing the expansion of investments into profitable industries such as real estate.

The MPAO cannot invest in real estate as none are currently listed securities at the Maldives Stock Exchange, the only registered stock exchange in the country, said CEO Mohamed Hussain Manik.

The Maldives Pension Act states that pension assets can only be invested in securities listed at a licensed stock exchange in the Maldives.

Manik said the office was currently in the process of identifying reliable and secure investments at technical level. Based on the findings of this work, the MPAO will consider expansion, but it may require amendments to the law, he added.

In order to prepare for the future plans for expansion, the MPAO recently held an investment seminar targeting the finance sector as well as a finance forum to discuss international finance and capital markets.

While the Pension Act details many conditions which should be considered when investing from the fund – such as minimum risk and maximum returns for the beneficiaries of the scheme – it also stresses diversification of investments.

According to the office, the annual return from current investments are on average at 7 – 8 percent with the fund expected to reach an estimated MVR3 billion by September or October this year.

In a press statement, the office has said that, considering the current inflation rates, this return is profitable for the beneficiaries for the scheme.

It was highlighted, however, that in order to sustain the increasing returns as the fund grows in size, they may have to take advantage of more investment opportunities both in the Maldives and abroad.

Statistics from April 2014 indicate that nearly 83 percent of the fund’s investment portfolio goes into government treasury bills which, according to the office, is also the most profitable due to high interest rates caused by increasing government debt.

Only 7 percent of it is invested in domestic equity and less than seven percent in fixed deposits.

Earlier this month the Capital Market Development Authority (CMDA) – an independent institution set up to develop and regulate the capital market and pension industry – said market development had not kept pace with pension development.

Speaking to Minivan News, CEO of the authority Fathimath Shafeega highlighted the importance of diversification and seeking profitable alternative investments for the pension fund, beyond the limitations of the Pension Act.

She also said that, following CMDA recommendations, the government – which holds a majority in the newly inaugurated parliament – is planning to introduce amendments to the Pension Act.

Beginning in March this year, the government more than doubled the monthly basic pension – with all citizens aged over 65 now receiving MVR5,000.

The basic pension, to which all retirement-age citizens are entitled, is still MVR 2,300 per month while the additional MVR2,700 is provided from the state budget by the Ministry of Finance and Treasury.

With an estimated 17,000 pensioners, 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.

At the time, the head of the cabinet’s economic council Ahmed Adeeb said that “innovative” methods, such as investing in the pension fund or government T-bills would prevent the need to divert funds from within the state budget. The MPAO has, however, said that no such arrangements have yet been made with regard to the basic pension.

The MPAO investments are currently made only for the Maldives Retirement Pension Scheme (MRPS) beneficiaries, a defined contribution scheme which requires both employer and employees to contribute seven percent (total fourteen percent) of the pensionable wage.

Under the plan, pension benefit payout at retirement will depend on the amount contributed and investment returns. It is mandatory for all Maldivian contract employees but voluntary for foreign employees.

Currently, MRPS beneficiaries will also receive a minimum of MVR5,000 if their payout is smaller than this amount.

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Maldives “ideally placed” to be international financial centre, says CMDA chief

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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CMDA states that government will cooperate to appoint more females to boards of directors

The Capital Market Development Authority (CMDA) has had confirmation it will receive complete government support in its initiative to appoint more females to the boards of directors of various companies.

The CMDA stated that in meetings with its CEO President Abdulla Yameen has agreed to support the authority’s initiative to introduce changes to the Corporate Governance Code, making it obligatory that 30 percent of all company boards registered with the authority by 2016 must be female.

The development authority further stated that 24 percent of participants in the director training and corporate governance awareness programmes held to date are female. Thereby, the authority is confident that there are a high number of qualified and capable female professionals in the country.

The authority further revealed that it has plans to conduct training to increase female participation in company boards.

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