Mauritius central bank is training closer lenses on cooperative credit unions, acknowledging the fact that cooperative credit unions are among the key players in the banking sector of the island economy.
Accordingly, a Memorandum of Understanding (MoU) was signed between the Bank of Mauritius (BOM) and the Registrar of Cooperatives in Port Louis on August 14, 2014.
The agreement aims to establish a mechanism for proper sharing of information and facilitating the effective supervision of cooperative credit unions.
Bank of Mauritius Governor Rundheersing Bheenick and Mauritius Business Minister Jangbahadoorsing Seetaram were present for the signing ceremony.
Governor Rundheersing Bheenick stated that cooperative credit unions are among the key players in the banking sector and appealed to them to increase their penetration rate, which currently stands at 6-9% as compared to 60-75% in other small countries.
He assured them that BOM will adopt a different approach in supervising credit unions compared to other regulators.
According to him, BOM is encouraging credit unions to come up with appropriate products, which can benefit the banking sector when targeting new audience and eventually widen their financial scope.
The MoU follows amendments under section 14E of the Banking Act as mentioned in Budget 2014, making provisions for BOM to license, regulate and supervise all cooperative credit unions having total assets in excess of Rs 20 million.
Additionally, the MOU makes provision for establishing a framework of cooperation to ensure effective supervision of credit unions; boosting stability and soundness of the financial system of Mauritius; eliminating duplication of effort, second-guessing and inefficiency in supervision of credit unions; and reducing any supervisory gaps and arbitrage in the financial sector, with emphasis on credit unions.
In his address, Seetaram highlighted that it was important to recognize the valuable contribution of co-operative credit unions towards the financial progress of their members in the society at large.
He noted that the credit union segment is the most prosperous segment of the cooperative sector in Mauritius, with almost half, around Rs 2.5 billion, of the turnover of the whole cooperative movement at Rs 5.5 billion accounted by the cooperative credit union sector.
The fact that the bank will supervise credit unions is expected to create confidence in its members and contribute to improved financial stability in the economy.
Furthermore, Minister Seetaram announced the setting up of a Joint working Group to tackle any threat that may arise to financial stability, coordinate information sharing, and avoid duplication.
Besides, credit unions need to be more informed on decision-making concerning loans applications to prevent over-financing, thus ensuring financial stability of their credit unions.
Hence, it is necessary for them to join the Mauritius Credit Information Bureau (MCIB) in order to get access to the MCIB database.
Currently, out of 1,041 active cooperative societies in Mauritius, there are as many as 157 active cooperative credit unions, which provide direct employment to 500 persons.
Only 29 cooperative credit unions have total assets above Rs 20 million, therefore they have applied for the grant of a licence under section 14E of the Banking Act 2004. The licences will be issued in due course.
Image (Government of Mauritius): A Memorandum of Understanding (MoU) was signed between the Bank of Mauritius (BOM) and the Registrar of Cooperatives in Port Louis on August 14, 2014 to establish a mechanism for information sharing and facilitate the effective supervision of cooperative credit unions.
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