Banking in Maldives

If we are to say something about the Banking industry of Maldives, we can say it is still in infant stage. even though some Banks has been operating since 1970s, Maldivians are yet to experience the efficiency and quality of modern banking. There are 6 Banks currently operating in Maldives, Bank of Maldives is the only Bank owned by Maldivians. HSBC is the only real commercial bank. All other Banks are branches of respective state Banks. Therefore there is no real competition in Banking industry.

Competing itself
Bank of Maldives PLC is the only Bank operating focused on providing retail banking services in Maldives. HSBC, SBI, BOC, HBL and Mauritius Commercial Banks are all concentrating on Corporate Banking. The consequences of which is poor retail banking services for the Maldivians. There is some competition in Corporate Banking, but only a few are capable of financing big development projects. Small Banks including BOC, HBL and MCB is not capable of financing resort development due to their size. Therefore we can strongly argue even the corporate banking sector is not competitive enough to derive economic efficiency and benefit the entrepreneurs expect.

Dissatisfied customers
Due to the lack of competition in the industry, customers have no real choice in choosing their Banker. BML is the only provider of Visa debit cards which can be widely used in conducting financial transactions. There are couple of businesses offering merchant services and credit cards including Cyprea, Villa and BOC, however their service is very limited. For instance, BOC Visa Debit card is just another ATM card. Customer cannot use it for paying for their purchases.

A very limited Internet Banking service is provided by BML. Transferring funds costs too much for an individual customer. The others are worse than BML while some of them have not even planned to provide the service in a near future. There are so many complaints from customers towards Card Center. Forged or erroneous transactions appear in the statement too often

Depositors have less choice or no choice at all where to keep their savings. Because if you keep somewhere other than BML, you must carry cash all the time. Deposit rates are so low that the spread between the deposit rate and lending rates of the Banks stretch by more than 9%. ( 12% for loans and 2-3% for deposits). Perhaps its better if we keep the money under the mattress as we did before.

A profitable industry
I wonder why none of the wealthy individuals have invested in Banking sector. Developing a resort costs $200M. Operating a small Bank will probably need same amount of capital for a start. Wouldn’t it be profitable to run a Bank? Huge amounts of profits are generated every year by the Banks even with their inefficient services. If a good Banks starts focusing on real efficiency and friendly service, I bet it will offer better dividends than running a resort. So why aren’t the rich Maldivians interested in investing in the Banking sector?

Future looks almost the same
An under-developed Banking industry has been there for more than 40 years. We have not seen Maldivians leading the Banks. Government is not much concerned about the growth of financial sector the results of which has already cost a lot to the citizens in terms of poor banking service. Foreign Banks are not concerned about retail Banking and MMA has probably nothing to motivate the foreigners to do so. The future, how bad we want to see bright, is not so promising.