Offshore Is On Top In Mauritius

The Mauritian banking sector is firmly focused on the offshore market, but some of its international players are looking for business closer to home.

Rundheersing Bheenick, governor of the Bank of Mauritius, says: "60% of the banking sector's total assets are now offshore."

But he points out that only six of the country's 21 banks are engaged predominantly in foreign banking, with the rest active in the domestic market (known as Segment A).

Still, the offshore business (Segment B) represents more than half of banks' deposit and loan books.

Funds mobilised outside Mauritius account for 55% of total deposits, and 58% of loans granted are for offshore entities.

The Mauritius Commercial Bank (MCB, #50) earns more than 40% of its profits from international operations.

"The Segment A business has gained from the increased competition from the B players," says Aisha Timol, chief executive of the Mauritius Bankers Association.

International banks like Standard Chartered, which have been hitherto focused on wholesale offshore banking largely to India, entered the domestic economy for the first time in 2013.

Standard Chartered is setting itself up as a hub as part of a strategic repositioning towards other African countries that has led the bank to invest $55m in people, processes and systems in Mauritius since 2009.

In late March, MCB announced a restructuring plan to separate its banking and non-banking activities as subsidiaries under a new holding company.

As part of a Rs5bn ($161m) capital-raising plan, the bank launched a Rs3bn bond in June that rose to R4.5bn due to oversubscription.

The restructuring came after the central bank indicated it would like to see the larger domestic banks create holding companies.

The Bank of Mauritius is also pushing international banks to set up local subsidiaries rather than branches. As a result, Barclays has been operating as Barclays Bank Mauritius Limited since June.

African expansion

The newer banks are following the double-act of MCB and the State Bank of Mauritius into the subregion.

AfrAsia Bank, which conglomerate GML set up in 2007, bought a minority share in Zimbabwe's Kingdom Financial Holdings in 2012.

It rebranded the bank – which has a commercial bank, microfinance and asset management businesses and branches in Malawi and Botswana – as AfrAsia Kingdom Zimbabwe.

"We're still quite under-geared as a bank," says AfrAsia's chief executive James Benoit, indicating that the bank has a 50% loan-to-deposit ratio.

He says it would expand both its domestic and international loan books by 25% in the next 12 months. "We see this as a prime opportunity to take market share where other banks may be hurt or raising capital," he explains.

The country's newest bank, BanyanTree Bank, operated by India's BanyanTree Group, opened in February 2013, and the central bank is keen to attract more international banks.

"Leading Chinese and Indian banks have enquired about the prospects of operating in Mauritius," says Bheenick, indicating that they would be welcome "if they can prove to have viable business models of interest to us".?