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In 2020, the money lending activity, which was previously regulated by the Bank of Mauritius, came under the jurisdiction of the Financial Services Commission (FSC). A new Section 14A was included in the Financial Services Act 2007 (FSA) who, among othersprovides that a person, other than a bank, who lends money as a business must hold a money lending licence.
Certain people are exempt from the requirement to apply for a money lending license, including:
- every person authentic carrying on a banking or insurance business or authentic the operation of any business not having as its principal object the lending of money, during which and for the purposes of which it lends money;
- any body corporate, incorporated or expressly empowered, or any other person expressly empowered by any other law to lend money; and
- any organization whose operations are international in nature and which is approved by the Minister of Financial Services, Good Governance and Institutional Reforms.
Money lending as a licensed activity has had an anecdotal history. It was first regulated by the Money Lenders Act 1960 which regulated money lending activities in Mauritius by organizations not specifically licensed as Mauritian banks under the Banking Act 2004.
The Pawnbrokers Act was abolished on 21 December 2013 and various revisions were made to the Banks Act 2004 in 2015 and the licensing regime for banks and pawnbrokers was consolidated into the same act . The final change was from the 2004 Banking Act to the FSA indicating a marked change in the regulatory regime.
During this period, no non-bank money lenders were approved. The debt market remained dominated by local and international banks in their banking activities and raised funds mainly through deposits and borrowings from other financial institutions, resulting in a cost of more or less uniform capital throughout the market.
The private lending industry was somewhat in a vacuum. There was piecemeal legislation that regulated the activity of incurring debt and making loans. Activities such as credit finance, leasing and crowdfunding fall under financial business activities and an FSA Section 14 license is required to engage in any of these activities, while finance structured can only be conducted by a protected cell company incorporated under the protected cell. Companies Act 1999.
The absence of a general law governing loans (as a separate activity from banking) meant that Mauritius was not attractive to credit funds and other forms of small and medium-sized enterprises (SME) ready.
A growing number of growing businesses in Africa are in need of financing and, despite the various avenues of fundraising, the structural mismatch between supply and demand for capital is a recurring problem in the African investment ecosystem. . This lack of financing options has made private debt a popular class of investment and it is expected that access to credit will be key to improving the performance of African businesses as the total amount of capital available increases and the investment ecosystem is growing.
The FSC, as the new regulator for money lenders, has published the licensing criteria for a money lending license and is accepting applications for a money lending license.
An applicant for a Money Lending License must maintain a minimum stated unimpaired capital of MUR 30 million (or equivalent amount) or 5% of its total liabilities or such other amount as may be determined by the FSC. The applicant must provide information relating to its activity to the FSC, in particular:
- details of operations/process flows for money lending activity, including but not limited to the following: customer onboarding/risk profiling, credit assessment/scoring, approval and documentation and disbursement;
- indication of any funding limits;
- indication of the interest rate to be charged and the basis on which the interest rate is calculated;
- details of the applicable fees for providing the services;
- details of the guarantees to be provided in connection with the loan of money; and
- details on the duration of repayment of the sums lent.
In addition, the applicant must provide its business plan, constitution, internal procedures and compliance manual, AML policy, risk management policy and disaster recovery and business continuity plan to the FSC as supporting documents for the application.
Interest income generated by pawnbrokers will be subject to an 80% income tax exemption if certain substance requirements are met. These are: to carry out “basic income generating activities” in Mauritius; directly or indirectly employ a sufficient number of suitably qualified people to carry out the main income-generating activities; and incur a minimum outlay commensurate with the lender’s level of activity.
The ‘basic income-generating activities’ requirement for interest income (which was provided by the OECD and has been replicated in Mauritius and various other jurisdictions) includes ‘agreement on funding terms , the definition of the conditions and duration of all financing, the monitoring and review of all agreements and the management of possible risks”.
For many years, Mauritius was known as a great place to channel primarily equity investments while its debt market remained underserved. It is hoped that the new money lending license will bring credibility and impetus to private lending by attracting global players to structure debt funds and debt instruments to bridge the financing gap in the African financial market. and global.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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