Guest writer: Mr. Hassan Manik, CEO, Maldives Stock Exchange
The financial sector is a very volatile field in any part of the world and in a country like the Maldives there are many challenges. But these challenges are not obstacles that cannot be resolved. In fact, I strongly believe that as a new entrant to the global financial world we have an advantage if we carefully analyze and learn from others. We don’t have to follow what the rest of the world has done but rather customize solutions in achieving our objectives.
The capital market as a concept has been promoted in the Maldives since the late 90s. However, we have not been able to position ourselves as the preferred avenue to raise funds and attract investments. Firstly, retail investors have not had any investment avenues encouraging long-term savings in the last few decades. Hence the culture of savings has not been encouraged amongst us and the funds available within the retail investors are very limited. The far-sighted economic vision of the present government in envisioning a future with public ownership and stake in the crucial tourism sector is a promising start towards creating this culture of saving and investment.
The other important element is institutional investors on the supply side. Usually, pension funds, insurance companies, and other cash-rich business ventures invest in products listed on a stock market. This has not been the case in Maldives until recently when the Maldives Pension Fund became the largest institutional investor in the country.
On the demand side, we have our entrepreneurs. Normally, companies that enter the stock market are mature businesses that need a new direction in terms of growth and expansion. These businesses are no longer directly managed by the owners that founded them. Most of the companies that go to the capital market are mature businesses management by second or third generation. Maldivian companies are relatively young in this comparison.
The life of a public company is very different from that of private limited companies that constitute most of our business sector. When companies raise funds from the public, they are required to adhere to a higher level of corporate governance. Companies raising funds from the public should be willing to engage with shareholders and stakeholders in matters of public interest.
We must ask ourselves whether there are companies who are willing to take this path?
During my 5-year tenure as the CEO of Maldives Stock Exchange, I have met many potential companies to list on the stock exchange. However, their level of preparedness to take on the responsibilities I just mentioned is debatable.
So, the question arises why are they hesitant to raise funds by floating their company. perhaps it is a lack of understanding of stock exchange and how it operates? Or perhaps they are concerned about losing control over the business? or that these companies are capable of raising the required funds from other sources—such as banks, friends, and family as well as through foreign investors?
I strongly believe that to improve the economic landscape of the Maldives, we need to increase financial intermediation and that cannot be achieved by commercial banks alone.
There are many challenges, but all of those are manageable with appropriate dialogue and support from the Government and other stakeholders. Currently, our efforts are anchored towards problem-solving through introducing customized IT solutions. It is easier said than done. I believe that if businesses can showcase themselves to potential investors through MSE platforms, more people will become conversant with the businesses that are making progress. This will create interest groups for these businesses, and in return, they will be able to tap into finance from such investors in future floatation.
At MSE, we are investing heavily into building innovative technological solutions. We want to reimagine the role of the stock market platform in economic development; we want to establish a more attractive and accessible vehicle for growth of Maldivian businesses.