The cabinet has approved the sale of the government's stake in the SME Development Finance Corporation (SDFC) to the Bank of Maldives (BML).

According to the President's Office, BML had expressed interest in acquiring the government's stake in SDFC. The cabinet had then reviewed a research paper submitted by the Finance Ministry.

The government had earlier denied reports that the stake in SDFC would be sold to BML.

"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.

The President's Office also said SDFC will operate as an Islamic finance institution in line with Shariah principles and will utilise an advanced digital banking system.

The government assured that BML will retain its current interest rates for small and medium-sized loans.

SDFC was created in 2019 and has issued around MVR 2 billion worth of loans over the past six years.