In conversation with
Managing Director | Barclays Bank Mauritius
FDI Spotlight: What are the future strategic developments of the bank?
Ravin Dajee: Delivering value to our customers, colleagues and shareholders as well as making a difference in the community we operate in, remain the key drivers of our strategy.
Despite the decision of Barclays PLC to reduce its shareholding in Barclays Africa, our strategic ambition to be a leading financial services group in Africa remains unchanged. As Barclays Africa Group Ltd (BAGL), we remain committed to the continent. As a 100% owned entity of BAGL, Barclays Mauritius’ strategy is fully aligned with that of the group. Being part of a group which operates and leads in more than 10 markets across the continent, with around 42,000 colleagues and 12 million customers, we have access to a network of resources (knowledge, skills, systems and human capital), on which we can leverage to bring new and innovative solutions to our customers on the local market.
The excellent reputation of Mauritius – as a credible financial centre, the expertise built over time, its favourable legal, political and regulatory frameworks, coupled with its conducive connectivity and ability to deliver high-quality services through its skilled human capital – add to the country’s attractiveness for investors. As a well-established and capitalised bank, Barclays Mauritius is able to leverage on those positive country attributes to help local and global corporates make the most of the opportunities which Africa has to offer.
What are your insights on the banking sector and long-term impact on the country’s economic growth?
Ravin Dajee: There is a ‘long debated’ issue about whether a connection between financial development and economic growth exists. The question is whether there is causality and if so in what direction: does financial development induce economic growth or does financial development follow economic growth. Most empirical studies usually conclude that development in the financial sector accelerates economic growth. Mauritius has evolved over the years and significantly developed its financial services sector to include other segments such as Global businesses, Capital Markets, Insurance and Ancillary services. The financial services sector continues to grow at an annual rate of over 5% with a contribution of 10.3% to the GDP as at 2015.
As per the Central Bank’s latest Monetary Policy and Financial Stability Report, the percentage of GDP accounted for, through credit given to corporates and individuals, was broadly in line with preceding years. For corporates, the biggest recipients of credit have been construction, tourism and trading industries, contributing to nearly 70% of the credit disbursed to the private sector. As for individuals, growth of bank credit to households hovers at about 5% annually.
The country’s average economic growth over the last 3 years was 3.5%. There is an ambition to push this growth to the 7% mark in the near future which may be a very ambitious target. Can the banking sector contribute towards achieving this growth? Banks can add more value to both domestic and global banking sectors.
One market segment which can help to grow the economy with more support from the banking sector is the medium sized businesses or business banking segment. The potential for growth in this segment might be more than 20% annually. Banks can definitely fine-tune their offers to better support this segment. Furthermore, I believe that banks can play an advisory role to medium sized businesses and encourage them to diversify in new emerging industries.
As for local large corporates, given the deleveraging and ongoing restructuring exercises undertaken by some large borrowers, it is projected that corporate indebtedness would remain at par over the medium term. For this segment, international and regional banks can be the catalyst to accompany the corporates in the region. As per the Africa Centre of Excellence for Business, there are approximately 120 Mauritian companies with operations in 21 African countries.
The international banking sector has the potential to contribute to higher economic growth by positioning itself as a finance hub for Africa. The emergence of Mauritius as a global financial services centre may be attributed to a well-capitalised banking system – an effective telecommunications infrastructure, qualified local workers, adherence to rule of law and significant legislative reform that has facilitated domestic and foreign participation in Mauritius’ economy as a whole, and in its financial services sector in particular. The known challenges for this sector are the Base Erosion and Profit Shifting (BEPS) regulations being adopted by the Organisation for Economic Co-operation and Development’s (OECD) members, the changes to Mauritius Double Taxation Avoidance Agreement (DTAA) with India as well as forthcoming competition from other emerging financial centres in the sub Saharan Africa like Botswana, Rwanda and Kenya.
Mauritius was among the first jurisdictions to be added to the OECD ‘whitelist’ representing jurisdictions that have implemented the internationally agreed tax standards and as for the new DTAA with India, the amendments to the protocol bring stability and certainty which is good for business.
With respect to becoming a finance hub for Africa, the country has a network of agreements with African countries – 19 Investment Promotion and Protection Agreements (IPPAs) and 17 Double Taxation Avoidance Agreements (DTAAs). In addition, the Stock Exchange of Mauritius is expanding into a regional one, with special regulations for enabling the listing of junior mining companies.
If the international banking sector succeeds in positioning itself as a finance hub for Africa, it will have the potential to attract more international banks to Mauritius. The direct benefits would be the employment opportunities this creates as well as the exposure to international practices. Many other types of firms – especially law, accounting and technology firms – would also benefit through the services provided to the new entrants. The key direct benefit to the government is the tax revenue that such a growth can generate.
What are the opportunities to further attract more regional and international banks?
Ravin Dajee: As it stands, Mauritius has a highly competitive banking industry comprising of 22 banks out of which only 6 are local with Bank of China (Mauritius) Limited being the latest entrant in March 2016.
With the global digital revolution, we note that banks’ competitive landscape is starting to take a different shape. Competition is extending to other sectors, such as fin-tech and telecommunications. To remain relevant, existing or new banks will therefore have to ‘reinvent’ the way they do business and bring better, faster and cheaper services to respond to the evolving needs of the customer. This challenge brings along new opportunities which banks can seize by opening their doors to innovators who can bring in new ideas and by collaborating with partners to develop banking solutions suitable for the future.
How important is the diversification and sophistication of banking services and products currently being offered in Mauritius?
Ravin Dajee: As the customer’s financial needs evolve and become more sophisticated, banks are required to review and adapt their offerings accordingly. Banks have diversified their services to cater for personal, domestic and international corporate customers.
Banks have invested over time in new service channels – such as more sophisticated ATMs (delivering certain services which were previously only provided in branches), Mobile and Internet banking, 24/7 service centres – to bring more convenience to customers, as well as respond to their increasing demand in high quality services at affordable rates. Domestic banks have also diversified by partnering with non-banking businesses or through subsidiaries and affiliates – for example in the Insurance and leasing sectors.
Global Markets have evolved over the years from being primarily a supplier of plain vanilla Foreign Exchange products to offering sophisticated Risk Management and Derivative Products. It is of utmost importance nowadays that our clients are considered as being our partner and as such, tailor-made products and services are essential. An example of a tailor-made product will be the Repurchase Agreement (Repo) product (under the Global Master Repurchase Agreement).
As customers are becoming more and more sophisticated on their end as well, electronic Foreign Exchange conversion platforms are becoming part of the dealing culture. Such platforms guarantee straight through processing, offer more competitive pricing than the traditional phone dealing, and offer enhanced liquidity.
The operational framework for Primary Dealers and Foreign Exchange Market Makers from the Central Bank that will soon be implemented will assist in the development of the secondary market of Fixed Income securities thus opening the door to better price-discovery and improving liquidity.
What is Mauritius’ potential to become a world-class regional financial centre for Eastern and Southern Africa?
Ravin Dajee: As per the latest Global Financial Centre Index, Mauritius’ has grown into a more sophisticated International Financial Services Centre, moving from a classification of ‘Local/Evolving’ to ‘Transnational/Transnational Specialist’.
Increasingly the island is being recognised as a platform for investment into African countries. The location of Mauritius gives the island a significant advantage in servicing African markets and official statistics show that a significant portion of foreign direct investment into Africa has been structured through Mauritian investment vehicles. Mauritius is a member of a number of regional trade blocks, including the Common Market for Eastern and Southern Africa (COMESA) and the Southern Africa Development Community (SADC), and has signed a wide network of Double Tax Agreements (DTAs) and Investment Promotion and Protection Agreements (IPPAs).
The island has close historical, political, economic and cultural ties with countries including India, China, and European nations such as France and the UK. Investors choose Mauritius for commercial reasons, including the high quality of service, the legal and regulatory frameworks and the excellent reputation of the jurisdiction. The island also has a good track record of political, economic and social stability.
Why choose Mauritius as a stepping stone platform for global investment?
Ravin Dajee: Over the years Mauritius has built a strong reputation as a safe, reliable and secure jurisdiction with best practices in terms of transparency, good governance and ethics. It is rated among the first in Africa for its ease of doing business, economic freedom and good governance.
Among other sectors, the Financial Services sector is increasingly being viewed as one of the major contributors to the Mauritian economy and to sustain its development as an International Financial Centre, Mauritius is continuously enhancing its range of financial products and moving towards the provision of quality and value added services.
How do you find the right human capital to match the market’s demand?
Ravin Dajee: The increasing demand for a skilled workforce in specialist areas and the country’s small market size can pose a challenge to match the local demand. The government’s clear guidelines about the recruitment of foreigners however enable banks to tap into global talents. Global and regional banks have an added advantage for they can leverage on their regional or global resources – to recruit from within the group’s broader talent base or upskill local people through mobility programmes. Recruiting skilled foreigners and mobility programmes allow an exchange of skills and knowledge to grow our local talent, thereby, developing our pool of local experts.
What is the future for Barclays Bank in Mauritius?
Ravin Dajee: Our good performance over the years evidences that we have the right strategy in place. Our strategy is aligned with that of Barclays Africa who aims to become the financial services group of choice on the continent. With nearly 100 years of experience and expertise acquired in Mauritius, we are optimistic that with the continuous development of our human capital and our ability to leverage on the resources of our group, we are well equipped to deliver our strategic intent.
We remain fully committed to helping our customers achieve their ambitions by continuing to be attentive to their changing needs and maintaining a long term partnership with them. As part of our citizenship agenda, we will continue to passionately apply our resources to Shared Growth which, for us, means having a positive impact on communities we serve, to contribute towards building a more equitable and prosperous Mauritius for the next generation.