The Maldives Monetary Authority (MMA) has determined that the Bank of Maldives (BML) acquired the SME Development Finance Corporation (SDFC) in violation of banking laws.
The MMA has now sent a letter to all relevant authorities to inform them that the transaction was illegal. However, the MMA and BML have not yet commented on the matter.
The President's Office said on Sunday that the decision to sell SDFC to BML was taken after discussions in the cabinet following a paper submitted by the Finance Ministry on a proposal from the national bank.
However, according to the Banking Act, the MMA's permission must be obtained before any such transaction can be conducted. This means that a proposal can only be submitted with the permission of the central bank. However, BML conducted the transaction without any approval.
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A source familiar with the matter said the MMA had instructed the transaction to be resumed after the procedures were properly conducted.
BML said SDFC will become a Sharia-compliant subsidiary of the bank.
"The Sharia-compliant, digital-first subsidiary of BML is expected to significantly boost its lending capacity — surpassing that of SDFC — while maintaining the attractive lending terms for MSMEs set by SDFC," BML stated.
"In its proposal, BML committed to lending MVR 500 million in the first year, with a target of MVR 1.9 billion over the next five years, and an allocation of MVR 300 million to support business start-ups over the next three years," the President's Office said on Sunday.
SDFC was created in 2019 and has issued around MVR 2 billion worth of loans over the past six years.
