Business Times Africa Magazine 2017 /vol 9/ No2 BT2Edition2017_web | Page 55

MAURITIAN BANKS THINK BEYOND HOME COMFORTS drive MauBank’s success. The lender has ambitious plans to capitalise on its strong SME and retail offerings to further its growth. “The merger of MPCB and NCB has given MauBank a market share of 8%. Our aim is to reach 15% and become the third significant bank in Mauritius,” says Mr Nagarajan. “We will do this slowly because our job now is not to grow the balance sheet but to put the bank back on track. We have actually shrunk the balance sheet slightly because we had too many high-cost deposits. Reducing these deposits has helped to push us into profitability.” International expansion Beyond the domestic market, a number of Mauritian banks are focusing more of their efforts on international growth. Indeed, many lenders have for some time looked towards mainland Africa and Asia as an engine of future growth, and capturing opportunities along the Africa-Asia corridor is a central theme for most Mauritian banks. Many already boast a footprint across multiple markets in Asia and Africa, but there is a strong trend to capitalise on these positions by leveraging relationships and market knowledge to drive new growth. AfrAsia Bank is no exception. “As a bank, our bandwidth is restricted due to our size. So we have defined the markets where we have sound local knowledge and significant relationships. In this respect, South Africa and India are two markets in which we have excellent local connectivity as well as strong understanding of the business landscape,” says Mr Bhasin. “Gradually, we want to diversify our country coverage on the asset side. We have started looking at smaller markets because we think we can understand these places better than some of our larger competitors. In this respect, we are carefully looking at opportunities in Sri Lanka, Bangladesh and Indonesia,” he adds. Other lenders are also making ambitious moves. SBM has been aggressively pursuing geographic expansion in recent years, which has seen it enlarge its presence across south Asia, sub-Saharan Africa and the Indian Ocean. “Our long-term growth strategy is built around regional expansion in order to cover the Asia-Africa corridor. Today, we have a presence in India, Madagascar and Myanmar, and soon in Kenya and Seychelles,” says Mr Li Kwong Wing. “We also want to open a representative office in Hong Kong, Dubai and South Africa. We are developing our footprint across this corridor to facilitate the flow of business, trade and capital between “GRADUALLY, WE WANT TO DIVERSIFY OUR COUNTRY COVERAGE ON THE ASSET SIDE. the two regions.” India focus This kind of international connectivity has long been a key ingredient to Mauritius’s economic success. In terms of financial services, the country's long history with India, characterised by its decades-old double taxation avoidance agreement (DTAA), has positioned the country as a successful international financial centre. But changing political currents in India have led to a renegotiation of this treaty, which reinstates capital gains taxes on Mauritian residents upon the transfer of Indian securities. The move was expected to hit the country's economy, as well as its offshore business, hard. But to date, the impact has been negligible. “The revised DTAA with India will not have any meaningful impact on Mauritius," says Mr Bhasin. "Indeed, we expect business flows to increase in the coming years. This is because the DTAA was attractive primarily for equity investments with India. “Moving forward, to support much- needed infrastructure developments, the debt markets are likely to play a much bigger role. And Mauritius can play a significant part here because it has a deep connectivity with, and understanding of, India. In addition, Mauritius benefits from abundant foreign currency liquidity,” he adds. African connections But the treaty change is giving Mauritius’s banks and wider financial services community fresh impetus to build closer ties with Africa. Most lenders are now looking to enhance their business lines with the continent by harnessing their accumulated specialised knowledge to position the country as a hub for treasury management and trade services, among other activities. “Fundamentally, MCB is truly African at heart and we are on the continent to stay. In fact, the African continent is an integral part of our medium- and long- term vision,” says MCB’s Mr Gufflet. But as Mauritian banks reap the rewards of regional expansion, they must also face up to a greater level of risk. In recent times, sub-Saharan Africa has been a source of political and economic volatility as commodity prices crashed and national currencies tanked. Political risks are also mounting in key markets, as shown by the South African government’s sacking of respected minister of finance Pravin Gordhan, replacing him with Malusi Gigaba, who has announced plans to radically transform the country’s economy. The move led Standard & Poor’s to downgrade its sovereign rating to junk status. Mr Bhasin says: “The regional credit cycle is not showing any signs of improvement. South Africa, in addition to a number of other African markets, is showing signs of a slowdown. We are hoping that South Africa’s recent downgrade doesn’t negatively impact the performance of the country’s corporates and banks.” TheBanker 2017 | Business Times Africa 53