The Cabinet has approved the sale of the government's stake in the SME Development Finance Corporation (SDFC) to the Bank of Maldives (BML).
The Cabinet took the decision following discussions on a paper submitted by the Ministry of Finance and Planning, outlining the benefits of a proposal submitted by the Bank of Maldives offering to buy shares in SDFC.
According to the government, the transfer of ownership to BML is intended to ensure uninterrupted loan services to SMEs. The sale of the government’s stake at SFDC to BML will this through BML’s financial capacity, it said.
BML has offered to provide loans of USD 32.4 million in the first year and USD 123.2 million over five years to small and medium enterprises after the acquisition of SDFC. The bank will also allocate USD 19.4 million over the next three years for business start-ups.
After the acquisition of SDFC by the Bank of Maldives, SDFC will operate as an Islamic finance institution conducting financial transactions in accordance with Shariah, within BML’s digital-first banking framework,
Under the new arrangement, SDFC will continue to issue small and medium enterprise loans at interest rates not exceeding the current rates. Financial transactions will be shaped to create a conducive environment for businesses and enhance their financial capacity and prosperity.
The Cabinet also noted that integrating SDFC into BML’s national network will enable the digitisation and automation of its operations. This will reduce manual work, speed up the processing of loans and improve the efficiency of the entire SDFC. As BML is a public company, the governance, planning and service delivery of SDFC will be strengthened, the government said.
Regarding the acquisition, BML said SDFC will become a Shari’ah compliant, digital-first subsidiary, providing technology-driven financial services, focused exclusively to broaden access to finance for the Micro, Small and Medium Enterprise (MSME) sector including underserved segments such as start-ups, women-led businesses, fishermen, farmers and agri-businesses as well as trade and e-commerce businesses.
The bank said the acquisition of SDFC is underpinned by a clear strategic rationale, leveraging BML’s robust financial position, extensive national network and growing digital banking expertise, to drive the digital transformation of MSME banking in the Maldives and promoting financial inclusion and economic diversification. SDFC will serve as the primary platform to deliver tailored financial solutions such as digital lending platform, digital marketplace, in addition to enhancing access to
finance and financial literacy support for the industry, it said.
BML’s Chief Operating Officer, Mohamed Shareef said the MSME sector serviced by SDFC is an important contributor to economic growth, playing a significant role in shaping the growth and innovation of the Maldivian economy. With this acquisition, the bank remains committed to create a transformative banking experience for MSMEs in the country through the Shari’ah compliant subsidiary, he said.