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Regarding the restructuring of the Development Bank of Mauritius (DBM), Finance Minister Xavier Duval indicated at the Parliament last week that two Indian banks, the Small Industries Development Bank of India (SIDBI) and the Bank of Maharastra, have indicated interest in acquiring a majority of the bank’s shares.

Also, the cabinet meet on April 11, 2014 disclosed that the Indian banks’ strategy behind acquiring a majority stake in DBM is to gain access to African markets and also become a ‘one-stop shop’ for small and medium enterprises (SMEs).

Accordingly, within the restructuring framework, these banks also want DBM to offer new services, particularly micro-credit in SMEs.

However, as the Indian experience has shown, micro-credit is open to criticism. Small borrowers often find themselves in a debt trap as the interest rates on micro-credit tend to be excessive, in order to counter the high risk of default in lending to a debtor with low creditworthiness.

Then again, besides actual provision of loans under its micro-credit facility, SIDBI also proposes other services to micro SMEs, including a service of loan facilitation to help entrepreneurs structure their demands of loans, in partnership with rating agencies and accredited consultants.

The aim of the loans for entrepreneurs is to help those who want to modernize their equipment or who have ambitions to expand, without necessarily possessing the required financial means.

Preferential rates are proposed to projects which take into account green energy needs for sustainable development.

According to the cabinet, the DBM is exhorted to become “the most preferred customer-centric bank servicing the unmet financial needs of micro, small and medium enterprises” with the aim of providing services customized to SMEs in sectors such as hospitality, agriculture, industry, business and environment.

If 50% of the proposed services will aim at SMEs, the rest will target the public in general.

In this context, it may be noted that a request has already been made to the central bank of Mauritius for obtaining a banking license.

The Small Industries Development Bank of India (SIDBI) and the Bank of Maharastra have indicated interest in acquiring a majority of the bank’s shares. (Image: The Exam Results)

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