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Mauritius is now considered Africa's Fintech Hub, but one question remains: is it for investors?

The fintech sector offers investors various opportunities, especially in Africa. However, entering such markets can be a complex task for a venture capitalist. While this industry will ensure your growth, it is not always easy to drive innovation through investment when you have to deal with local legislations and licensing issues. These can hamper tech development and consequently business and industry expansion. Nonetheless, the current era that we live in means that there is a call for businesses and governments alike to be open to tech disruption because this will improve the whole outlook for the continent. Moreover, we should not forget that tech ecosystems help ease the journey from innovation to market viable product.

Advantages for investors wishing to join the MATH

While investors would benefit from venturing into the fintech market, they might need some assistance or guidance. That is why joining the Mauritius Africa FinTech Hub would be a good idea. The following are some advantages of being part of the organisation:

  • Having access to a network of pan-African, Mauritian governments, corporates, FSPs, investors, fintech businesses, tech experts, entrepreneurs, fintech businesses and SMEs that is already very well established.
  • Being introduced to vetted tech innovators, SMEs and entrepreneurs.
  • Businesses that are part of the hub can get access to licencing support and may even have their applications fast-tracked. This means that investing within the hub will allow your venture to have an increased likelihood of getting its licensing approved.
  • Sharing and benefiting from the resources and knowledge of other businesses and legal and tech experts that form part of the Hub.
  • Attending roundtable events with regulatory bodies and help shape future fintech regulation.
  • Mauritius has a number of investment agreements in place with African states. This means that these can act as a buffer on behalf of those looking to enter emerging markets or invest in African fintech businesses.
  • Enjoying facilitated free workshops with government representatives, regulators and other decision-makers, providing an opportunity to shape future regulations.
  • Enjoying free or subsidised office space in Mauritius’s city centre.

Why work with a fintech hub based in Mauritius?

Mauritius is the ideal location for a fintech hub because of several reasons besides its proximity to Africa, of course. For instance, it

  • has a strong reputation for safety thanks to its several Investment Promotion and Protection Agreements (IPPAs) established with a number of African states. As such, it can act as a protective barrier between local African governments and businesses looking to enter new markets, and
  • is a known International Financial Centre which is widely known for its safety. The Mauritian business world is popular for its corporate governance culture as well as it’s stability. As such, it is the ideal sandbox environment.
  • Several fintech businesses offering their products in Africa have set up operations in Mauritius. Thus, a template already exists for investors. This means that there is a pool of knowledge, networks and experience for them to draw from.

The government and the Economic Development Board of Mauritius are working to position Mauritius as an International Financial Centre of excellence in the African continent. The 2019-2020 budget which was recently presented included several measures that will be taken to establish the country as a Fintech hub.

It was revealed that the Financial Services Commission will use technologies such as Robotics and Artificial Intelligence to develop innovative financial advisory services. These systems will help companies to study the businesses they are investing in and they will provide reliable recommendations based on an analysis of the market. Moreover, a new licence will be introduced for fintech Service providers and the government will encourage self-regulation for financial activities in consultation with the United Nations Office on Drugs and Crime. The introduction of e-signatures and e-licences on a pilot basis and the ability to create crowd-funding campaigns as licensable activities will also be part of the new innovations implemented.

For Mauritius to be recognised as a fintech hub of choice, a new taxation system for banks and regulatory guidelines are also required. This is because, currently, developments in the financial and technology sector are focussed on payment activities and this market is still dominated by traditional institutions. While there is a lot of interest among entrepreneurs to invest in new technologies, the fintech industry is still emerging. It is not completely part of the country’s financial regime and start-ups have not begun to displace conventional institutions yet. It is expected that the establishment of these organisations in the financial market will lead to two possible outcomes:

  1. In the long run, Mauritius’s financial regime will become more conversant with the fintech market and the products it offers. This will lead to new technologies and companies displacing traditional payment service providers.
  1. Traditional financial institutions, such as banks, will adopt new technologies to implement innovative solutions. It is very likely that they will partner with fintech companies for co-development of facilities and for testing among consumers.

Banks have already undertaken the necessary measures to keep up with the rapid changes taking place in the country so that they form part of the fintech sector and start-ups can get their activities running smoothly. For instance, The Bank of Mauritius has already issued specific guidelines. The first one is related to Internet Banking. This sets out a regulatory framework that all institutions should adopt if they offer Internet Banking services in Mauritius. This recommendation presents the strict minimum standards that firms must observe and it also lists out the requirements and processes involved in obtaining approval from the Bank of Mauritius to offer these services. It is to be noted that fintech firms are free to adopt standards and practices that are more stringent if they suit their operations and circumstances. Other changes are related to mobile banking and on the infrastructure behind this solution. They have been devised to promote a sound and reliable financial system in Mauritius. These are effective regulatory measures that will help Mauritius become the fintech hub of the African continent.

The fintech industry is an evolving one in Mauritius. Those wishing to set up such a business in the country or to operate financial activities must be aware of the forms of legal entity and regulations involved.

Potential forms of charter

There are three types of companies that can be established in Mauritius. They are

  1. Domestic companies: these may operate in Mauritius subject to any licence that may be required for licenced activities.
  2. Firms holding a Global Business Licence of Category 1. These are tax-resident companies but can conduct only certain activities in the country.
  3. Authorised companies- a new category of company whose business activities and Place of Effective Management are outside of Mauritius.

There are key differences in form regarding these institutions. Domestic companies are liable to income tax at the rate of 15%. Those with a Global Business Licence of Category 1 can benefit from the Double Taxation Agreement that Mauritius has signed with various countries. On the other hand, authorised companies do not have access to the Double Tax Avoidance Agreements network of Mauritius.

Regulatory institutions

The Bank of Mauritius generally offers and oversees services related to banking institutions and the Financial Services Commission is responsible for non-banking activities. Currently, there are very few fintech companies in the country and to date, regulators have not been conducting examination of these firms. However, if this industry expands and becomes fully functional with several operators, it is expected that regulators will conduct regular examinations. Along the same lines, no laws or regulations have been issued with regards to capital and liquidity requirements, affiliate transaction limitations or other regulatory requirements for fintech companies but considering developments, this might soon happen.

Non-regulatory legal infrastructure

Fintech companies in Mauritius will have to access real-time gross settlement systems through regulated financial institutions. There are no special insolvency regimes that apply differently to fintech companies as compared to regulated financial institutions.

Foreign companies wishing to operate a business in Mauritius are concerned with the The Electronic Transactions Act. This stipulate that signatures will not be denied legal effect, validity or enforceability because it is in electronic form.
An “electronic signature” is an electronic sound, symbol or process attached to or logically associated with an electronic record. It is executed or adopted by a person with the intent to sign the electronic record. The Electronic Transactions Act ensures the safety of the process. An e-signature will be verified as a secure one if, at the time it was made, it was

  • Unique to the person using it,
  • Capable of identifying the said person,
  • Created using a means that in solely under the control of the person using it and
  • Linked to the related electronic record in such a way that it will not be invalidated in case the record has been changed.

The fintech, financial-technology, industry is still in its emerging stages in Mauritius. However, the government and other relevant bodies are taking several steps so that Mauritius becomes a jurisdiction which caters for the development and success of innovations in the financial sector. This involves the implementation of several regulatory measures. It is expected that this sector will be further monitored as interest in fintech increases.

Currently, there are no directives that will hinder fintech innovation in Mauritius. However, banking activities are regulated by the Bank of Mauritius and insurance activities are managed by the Financial Services Commission. Thus, all companies engaging in such activities will need to be licensed by either one of these two organisations. Besides that, the government has another regulatory regime’s approach to consumers and small business customers. This is the ‘Companies Act’ and it lists out specific provisions for “small private companies” in Mauritius. These firms are those who do not hold a Category 1 Global Business Licence and whose turnover of their last preceding accounting period is less than 50 million rupees or such other amount as may be prescribed.

A small company has less strict filing and regulatory requirements. The discrepancies are as follows.

  1. It does not need to appoint an auditor,
  2. It does not need to file financial statements. Instead it has to file a simpler financial summary with the Registrar of Companies,
  3. It is not required to prepare and present its accounts according to the International Accounting Standards,
  4. It does not have to file an annual return and
  5. It is not required to appoint a company secretary.

On the other hand, foreign fintech companies have to apply for a Regulatory Sandbox Licence and they should appoint a custodian for their digital assets if they wish to operate in Mauritius. These will facilitate the setting up of fintech companies and enable their development. The Regulatory Sandbox Licence gives investors the possibility to conduct a business activity for which there is neither a legal framework nor adequate provisions under existing legislation in Mauritius. It is issued by the Board of Investment to eligible companies who wish to invest in innovative projects according to an agreed set of terms and conditions for a defined period. Additionally, foreign companies should apply for the Digital Assets Custody Service Licence. This framework has been introduced in March 2019 to offer a regulated landscape for the custody of digital assets.

To further enhance the development of the fintech sector and to help companies thrive, regulators and government authorities reached to experts in this domain. Following this, the British High Commission, in partnership with the Financial Services Promotion Agency (FSPA) and the Board of Investment (BOI), hosted a conference on fintech in Mauritius. It explored the development of the country as a FinTech hub for the Sub-Saharan Africa region. The various panel discussions and a group of experts shared their view on how the British fintech model can be applied in Mauritius to implement innovative solutions in the financial services sector and drive economic growth. As such, it is expected that relevant bodies will introduce more regulations in the future.