The financial sector in the Maldives is very narrow and is dominated by the banking industry. There are seven banks currently operating in the Maldives which include one locally owned commercial bank, branches of four foreign banks, one locally incorporated subsidiary of a foreign bank and an Islamic bank. The Non-bank financial institutions in the country consist of a finance leasing company, a specialized housing finance institution, insurance companies, money services businesses and securities market intermediaries. All banks and the non-bank financial institutions, except for the securities market intermediaries are licensed, regulated and supervised by the Maldives Monetary Authority. 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, asset managers, custodians, credit rating agencies as well as stock exchanges and central depositories. The regulatory powers are derived under the Maldives Securities Act, 2006 and Maldives Pension Act 2009.
Banks currently in operation:
State Bank of India (SBI) - established as a foreign bank branch in 1974.
Habib Bank Limited (HBL) - established as a foreign bank branch in 1976.
Bank of Ceylon (BOC) - established as a foreign bank branch in 1981
Bank of Maldives Plc. (BML) - established in 1982, a public limited company with majority ownership by the Government of Maldives.
Hong Kong Shanghai Banking Corporation Ltd. (HSBC) - established as a foreign bank branch in 2002.
Mauritius Commercial Bank Maldives Pvt. Ltd. (MCB) - established as a branch of the Mauritius Commercial Bank in May 2008 and converted to a subsidiary of the Mauritius Commercial Bank in September 2010.
Maldives Islamic Bank Pvt Ltd. - established in March 2011, owned by Islamic Corporation for Development of the Private Sector (ICD) and the Government of Maldives.
Non-Bank Financial Sector (NBFIs)
Non-banking financial institutions in the country include players in the general insurance market, a finance leasing company, a specialized housing finance institution and money transfer businesses.
The Allied Insurance Company of Maldives, incorporated in 1984 and owned by the State Trading Organization Plc Ltd is the only local insurance company in the country and the only composite insurance company. The Sri Lanka Insurance Corporation Ltd, being the oldest insurance service provider, established its branch office in the country in 1976. Several other insurance companies and market intermediaries from Sri Lanka operate in the country through their appointed local agents. Ceylinco Insurance Company Limited (Sri Lanka) is represented in the country through its local agent RSH Financial Service Pvt Ltd, while Amana Takaful (Sri Lanka) has been providing general insurance business in Maldives since 2005 through an agent; HMS private limited.
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. Reinsurance businesses relating to the activities of these companies are currently being provided by overseas re-insurers.
Under the assistance from the World Bank’s FIRST initiative, MMA initiated a project to establish a supervisory regime for the Insurance sector. This is a comprehensive project which includes drafting an Insurance Act, other subsidiary regulations and standard templates and procedure for collecting reporting returns. The first mission under the project took place during May 2008. During this mission, the first draft of the proposed Insurance Act was produced.
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. HDFC Plc was registered as a public company on the 9th of February 2006. The shareholders’ agreement for privatization between the government, ADB, IFC, and HDFC-India was signed on July 23, 2008. The initiative to restructure the capital and restart the business of HDFC Plc became effective on February 10, 2009 with the first equity disbursement by the international shareholders whose commitment also comprises of a multi-lateral loan component by IFC and ADB. As regards the structure of new shareholding, 49 percent is owned by the government, with the balance being shared between IFC (18 percent), ADB (18 percent), and HDFC (15 percent), respectively. After having re-structured its capital and with new lines of long-term credit, HDFC Plc has re-entered the market for mortgage loans for housing needs of individuals and families.
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 utilize their services for outward remittances from Malé.
The Capital Market Development Authority (CMDA)was established under the Maldives Securities Act (2006) and is responsible for regulating and developing the capital market in the Maldives.
The CMDA has been instrumental in developing the regulatory environment as well as the infrastructure for the organization of the securities market. Institutions that are regulated by the CMDA include listed companies, dealing companies, brokers, the stock exchange and central depository.
In 2008, the Securities Trading Floor and the Securities Depository were separated from the CMDA and licensed as a private sector Stock Exchange and Depository. As such, on January 2008 Maldives Securities Depository (MSD) and Maldives Stock Exchange Company Pvt Ltd were formulated as private sector institutions under the Maldives Securities Act.
Currently there are 6 companies with listed securities and 1 company with listed debt in Maldives Stock Exchange. The companies are; Maldives Tourism Development Corporation (MTDC), Maldives Transport and Contracting Company (MTCC), Bank of Maldives (BML), State Trading Organization (STO), Dhivehi Raajeyge Gulhun (DHIRAAGU), Amana Takaful Maldives (ATM) and Housing Development Finance Corporation (HDFC).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) has issued three corporate bonds which have been subscribed by institutional investors including the commercial banks and some of the public enterprises. Furthermore, Maldives Monetary Authority on behalf of the government, issues Treasury bills to commercial banks and state owned enterprises for the purpose of financing the budget deficit.
An Islamic debt securitiy (Sukuk) was introduced to the capital market by HDFC in 2013 for the first time.
At present there are two licensed dealing companies which include Stock Brokers Maldives Pvt Ltd and Aariya Securities Pvt Ltd.
Overview of the Economy