The financial sector in the Maldives is very narrow and dominated by the banking sector. The banking sector consists of one locally owned commercial bank - the Bank of Maldives and branches of four foreign owned commercial banks. Non-bank financial institutions in the country consist of insurance companies, a finance leasing company, a specialised housing finance institution, money services businesses and securities market intermediaries. All banks and the non bank financial institutions except for the securities market intermediaries operate under the supervision of the Maldives Monetary Authority (MMA). The Capital Market Development Authority (CMDA) is the regulator for the securities market in the Maldives. It has statutory powers to license securities market intermediaries including brokers, dealers, investment advisers, as well as stock exchanges and central depositories.


Banking Sector

The Bank of Maldives (BML) which was established in 1982 is a partly Government owned bank. The other banks are branches of State Bank of India (SBI) established in 1974, Habib Bank Limited (HBL) established in 1976 and Bank of Ceylon (BOC) established in 1981, and a branch of the Hong Kong Shanghai Banking Corporation (HSBC) established in March 2002. BML also carries out limited development banking activities.


Non-Bank Financial Sector (NBFIs)

Non-banking financial institutions in the country include players in the general insurance market, a finance leasing company, a specialised housing finance institution and money services businesses.

The Allied Insurance Company of Maldives, owned by the State Trading Organisation Plc Ltd is the only local insurance company in the country. Several other insurance undertakings and market intermediaries from neighboring countries operate in country through their appointed local agents. The insurance market has been virtually unregulated until September 2004, when a new set of regulations was introduced with the objective of facilitating the orderly development of the insurance sector. As an interim measure under the regulations, insurance undertakings and market intermediaries operating in the country as at September 2004 have been granted a temporary registration for a period of one financial year during which all such parties are required to meet all necessary conditions to qualify for full-fledged licenses in their respective categories. Insurance undertakings and market intermediaries operating in country are currently authorized to deal only with non-life insurance products. Reinsurance businesses relating to the activities of these companies are currently being provided by overseas re-insurers.

The Maldives Finance Leasing Company Pvt. Ltd., established in May 2002, is the only player in the finance leasing market. The company was setup as a collaborative venture between five domestic public and private sector entities and two international parties, in order to address the demand for medium to long-term equipment financing from all sectors of the economy.

The Housing Development Finance Corporation Ltd (HDFC), setup in March 2004, is an initiative of the government of Maldives to provide the much needed financing in the residential and commercial housing sector to address the pressing demand for housing, particularly in the Malé region.

Money services businesses in the country include three local companies operating as agents of international money transfer companies. The services of these companies are largely targeted towards the expatriates in the country who utilise their services for outward remittances from Malé.


Capital Market

The Maldives Securities Act 2006 constituted the Capital Market Development Authority (CMDA) as a specialised regulator for the securities market. Prior to this Act, the regulation and supervision of securities market was carried out by MMA, which created the Capital Market Development Section in 1995, and then strengthened it to become a Division in 2004. Initially, the Capital Market Development Division at MMA and now the CMDA has been instrumental in developing the regulatory environment as well as the infrastructure for the organization of the securities market.

At present, the only investment opportunity available to the public is a limited number of shares in the Bank of Maldives Plc (BML) and three other state owned public companies – Maldives Transport and Contracting Company Plc (MTCC) and State Trading Organization Plc (STO) and Maldives Tourism Development Corporation Plc (MTDC). Trading of these shares on secondary market is done through the Securities Trading Floor (STF) which was established in 2002. Currently STF performs the role of a Stock Exchange in Maldives which is operated within the premises of the CMDA.

In terms of a primary market for debt securities, neither government securities nor private sector commercial debt instruments are currently available to the general public. However, the Housing Development Finance Corporation Plc (HDFC) which is at present a fully Government owned entity instituted in early 2004, has issued three tranches of corporate bonds which have been subscribed by institutional investors including the commercial banks and some of the public enterprises. Furthermore, Maldives Monetary Authority issues Treasury bills and sells these to commercial banks and state owned enterprises for the purpose of managing liquidity.

Overview of the Economy