Mauritius Commercial Bank boasts of a rewarding 183-year history in Mauritius. Being the main subsidiary of MCB Group Ltd., it is the longest-running financial institution in Mauritius and today is ranked as the nation’s foremost bank. From its beginnings, MCB has dedicated itself to helping “people with ideas become entrepreneurs and businesses grow” and acted as a crucial player in the country’s economic development, supporting small businesses in agriculture, trade and industry. MCB has achieved numerous firsts in the Mauritian market, including automated teller machines, mobile points of sale, teller cash recycler machines, online and mobile banking. Over time, MCB has diversified its business activities across market segments and geographies. Today, it is actively involved in various locations throughout sub-Saharan Africa while remaining vigilant to growth opportunities beyond. MCB has built up an extensive international presence, including a wide network of correspondent banks worldwide, with over 100 in Africa, and representative offices in Johannesburg, Nairobi, Paris and Dubai, alongside MCB Group’s involvement in Seychelles, Madagascar and Maldives. MCB has also expanded into non-banking financial services, including investor services through MCB Capital Markets Ltd. MCB aims to be the “Bank of Banks” by serving as a regional focal point for trade finance, payments and card operations.
MCB is determined to transform itself by becoming increasingly “digital, sustainable and people-focused” through three main programmes: Corporate Sustainability, HR Transformation and Digital Transformation. The bank’s technology focus, designed to deliver a “more efficient and exciting” customer experience, has only been reinforced during the pandemic, as its more than one million customers choose to bank more digitally. Its 2,900-plus staff is guided daily by MCB’s corporate values: Integrity, Customer Care, Teamwork, Knowledge, Innovation and Excellence.
International Banker was pleased to have the opportunity to ask Mr. Alain Law Min, Chief Executive Officer of Mauritius Commercial Bank, a series of questions about the bank’s progress during one of the most trying periods of its long history.
Thank you for your time today, Mr. Law Min….
According to Mauritius Commercial Bank’s (MCB’s) most recent financial statements for the nine months ending March 31, 2021, the bank managed to increase its net profit compared with the same nine-month period in 2020: Rs 5,980 million versus Rs 5,783 million. To what main factor(s) do you attribute this strong performance?
Results for the nine months ended March 31, 2021, were impacted by our prudent approach to strengthening provisioning levels in the form of expected credit losses amidst heightened credit risks induced by the pandemic. Yet, profit after tax rose by 3.4 percent for the period, with operating income maintaining resilient growth, supported by our diversification strategy. Net interest income increased on the back of notable growth in investment securities and expansion of the international loan book. In particular, we further widened and deepened our involvement in energy and commodity financing while making inroads in diversifying our portfolio of international structured-finance deals. With regard to non-interest income, our net fee and commission income rose by almost 10 percent following strong performance linked to regional trade financing and wealth-management activities. Importantly, we preserved our financial soundness. The bank’s liquidity coverage ratio (LCR) and capitalisation ratios remained comfortably above the local minimum regulatory requirements, while NPL (nonperforming loan) ratios were relatively stable. Looking ahead, we expect our international operations to continue to be resilient and well positioned to benefit from the gradual recovery of global economic conditions, while local activity levels are expected to gather momentum progressively in line with the phased reopening of the country’s borders and anticipated economic recovery.
As I understand, you joined the bank back in 1995 and were appointed to the role of chief executive in 2017. Would you say the current situation regarding the global pandemic has been the most challenging period the bank has faced during your time at MCB? And what is the most important lesson you have learnt as a banking leader during this pandemic era?
Indeed, during my 25 years career at the bank, this has been the most difficult and challenging time for the Mauritian economy and, by extension, our bank. Since the 1980s, Mauritius had experienced the uninterrupted growth of its economy, which had seen the emergence and consolidation of its key economic pillars and its progress to becoming a high-income economy—prior to the ramifications of the pandemic. The latter had a sudden and marked impact on our economy, which led to a contraction of our GDP (gross domestic product) by 15 percent during the year 2020. All businesses, large and small, and individuals were affected, one way or another, by this slowdown.
At MCB, we were confronted with a number of challenges, and the pandemic taught us several lessons about humility, resilience and adaptability. For me, one of the key lessons was the need for care and understanding towards all stakeholders in the face of adversity. Right from the start, we placed the health, safety and wellbeing of our employees as our utmost priority. As a bank providing an essential service to our community, it was a continuous balancing act between preserving the health and safety of our employees while serving and supporting our customers affected by the pandemic. We were also bound by our legal and regulatory duties, which set out challenging work arrangements for the banking sector.
This required continuous dialogue and interaction with our key stakeholders: our employees, customers, authorities, regulators and wider community. Our strong corporate values around customer care and team spirit helped us overcome many constraints to business continuity. Our employees’ adaptability and resilience helped us devise innovative ways to serve our customers whilst implementing support programmes for those affected by the pandemic. Thanks to technology, we were able to keep a maximum of our staff working safely from home, reaching 90 percent at the peak of the pandemic whilst maintaining continuity of service.
How important has digital banking’s role been in the bank’s overall response to the limitations on banking imposed by the pandemic? The JuiceByMCB mobile-banking service sounds like a particularly intriguing offering. What differentiates it from other mobile-banking services in the local market?
The pandemic accelerated the move towards adopting digital banking in line with trends observed across the globe. To limit movements and protect the population, we encouraged our customers and the public to opt for our digital channels, including our contactless-payment services and our MCB Juice mobile-banking application, both of which have witnessed significant growth since the outbreak of the virus. With regard to MCB Juice, it is worth noting that MCB was the first bank on the island to launch a two-in-one mobile banking and payments application back in 2013. Since its introduction, we have continuously upgraded the user-friendliness and convenience of this service, with new features added. MCB Juice currently boasts more than 397,000 subscribers, including some 64,000 new users over the past year, thus firmly strengthening our local leadership position in this segment.
To promote the take-up of digital-payment methods by merchants, we also put in place a swift onboarding process and equipped the SME (small and medium-sized enterprise) segment with an array of payment-acceptance solutions adapted to the needs of our different types of clients. As a result, the adoption of digital-payments terminals registered a growth of more than 140 percent as of June 2021. Furthermore, as part of our Digital Transformation Programme, we launched our business-account opening platform that provides clients with the leeway to create and avail their business accounts online via a full end-to-end process. We also recently launchedour secure and easy-to-use JuicePro application, the first dedicated mobile-banking application on the local market catering to entrepreneurs’ daily transactional and other banking needs. Moreover, to enable faster transactions approval for the convenience of our corporate clients, we launched the SmartApprove application in February 2020, weeks before Mauritius went under lockdown. SmartApprove is a convenient and secure web-responsive application that allows authorised signatories to approve transactions electronically and spontaneously via tablet, smartphone or personal computer.
One of the three core pillars of MCB’s corporate-sustainability programme, Success Beyond Numbers, is stated as “valuing and safeguarding our cultural and environmental heritage”. Do you have any recent examples of the bank demonstrating its commitment to upholding this pillar? How do the Klima initiatives highlight the bank’s dedication to combatting climate change?
Our corporate-sustainability programme Success Beyond Numbers’ core mission hinges on three pillars, among which is preserving our country’s environmental and cultural heritages. MCB has been one of the first local companies to calculate its carbon footprint to assess the efficiency of measures put in place internally. In 2019, we committed to decrease our energy intensity by 23 percent by 2023 and set a goal to contribute to climate neutrality by retro-offsetting all the emissions coming from our operational scope.
We have collaborated with the Mauritian Wildlife Foundation (MWF), committing to fund MWF’s conservation efforts for biodiversity over the next three years. To rally our customers to the cause, we launched the Your Card for Change program, through which each time a customer uses his MCB debit card, the bank donates money to help MWA finance its activities. The program also introduced new PLA (polylactic acid) biodegradable cards. Our initiatives to help preserve our cultural heritage include, among others, VIBE Moris, a song contest meant to discover new talent, and “Rises nou Kiltir” (“our cultural wealth” in Creole), a call for projects aimed at supporting arts and music.
The Klima conference (klima being the Creole translation of the word climate) was the first of its kind about climate change organised in Mauritius by a private company. The event was a success as it was attended by around 350 people, comprising economic actors, entrepreneurs, academics and local and international NGOs (non-governmental organisations), including the Minister of Environment, Solid Waste Management and Climate Change. A report, “Klima Neutral 2050”, was unveiled during the conference. It emphasized the fact that our island country, which is highly exposed to natural disasters, can aim for carbon neutrality by 2050 and that a low-carbon economy can be a source of economic opportunity rather than constraints.
MCB has committed to stop financing new coal infrastructures locally and stop funding the international coal trade by 2022. Since the report’s release, MCB has fully compensated its residual emissions for the last two years. We have also committed to investing 5 million EUR in Livelihoods Carbon Fund 3 (LCF3), a carbon-impact fund created by Livelihoods Funds with leading companies worldwide joining forces to accelerate efforts on climate-change mitigation and social impact. Our investment is expected to generate around 800,000 tons of carbon credits over the fund’s lifetime.
As I understand, the bank continues to widen and deepen its involvement in energy and commodity financing through its position as one of the leading providers of financing for the importation of oil and gas in the Indian Ocean and Africa—and as a widespread partner for direct and joint financing of oil and gas transactions in the region. Does holding such a position compromise the bank’s commitment towards achieving sustainability targets, particularly regarding the conflict between fossil-fuel involvement and reaching environmental and climate targets?
We reckon the impacts of fossil fuels on environmental and climate change, and the bank remains committed to mitigating those impacts. Our deals are assessed to ensure that climate risks are identified through MCB’s environmental and risk-management frameworks. Appropriate mitigation measures are also put in place to ensure compliance with environmental and social laws in Mauritius and the countries in which we operate and best industry practices. Furthermore, our clients quantify GHG (greenhouse gas) emissions from oil and gas transactions and these are, in turn, analysed by our internal team to ensure alignment with our targets.
As of today, oil and gas transactions contribute significantly to the African economy by alleviating poverty through the creation of jobs, providing energy and clean water to the population, furnishing education through capacity building, offering access to health systems and improving infrastructure. The oil-and-gas sector remains a significant portion of MCB’s portfolio. However, through our commitment as an African bank, we engage with our clients and other stakeholders to ensure that climate and environmental risks are mitigated until future technologies allow cleaner alternatives.
What does the phrase “Lokal is beautiful” mean to MCB and Mauritius in general? And what are some of the most significant activities the bank is currently undertaking under this particular sustainability mission?
MCB has been present in Mauritius for more than 182 years now. We have accompanied the country through various economic transitions, and as the reference bank in Mauritius, we have the responsibility to contribute to a thriving economy for the country. In this respect, MCB highly values the significance and potential of SMEs in supporting the nation’s economic progress. This can be gauged by our leading position in respect of credit facilities granted under the government–backed SME Financing Scheme, with a corresponding market share of around 46 percent posted for the December 2011–June 2021 period. Right at the outset of the pandemic, we introduced dedicated measures to support SMEs while working closely with the authorities. In particular, we designed structured and tailored flexible repayment solutions such as deferrals of loan repayments—on principal or even interest—and rescheduling existing facilities over a longer period to relieve pressure on their incomes.
Even before the pandemic struck Mauritius in January 2019, we had launched Lokal is Beautiful, our first initiative materialising our Success Beyond Numbers philosophy. We organised a conference during which the “Lokal Is Beautiful” report was presented to local economic actors. The study’s objectives were to understand how prosperity is achieved in Mauritius and identify the mechanisms that create wealth, including how much of it is generated from local economic circuits. The main message is that Mauritius should minimise its economic leaks and promote local value-added by encouraging local production and consumption, thereby enhancing the country’s economic resilience.
Additionally, this year, we launched Punch—a platform aimed at developing a community of entrepreneurs to empower SMEs to reinvent their business models and thrive in the new normal. They can connect with other companies and professionals and find inspiration, tools, expertise and financing to grow their businesses. More than 500 entrepreneurs have already registered to the platform since its June release.
MCB has an extensive international presence, including a network of more than 550 correspondent banks worldwide (with around 130 in Africa), representative offices in Johannesburg, Nairobi, Paris and Dubai, and the MCB Group’s presence in Seychelles, Madagascar and Maldives. Do you see any further geographical expansion into new territories over the next few years?
If you look at our journey, we have been extending our reach outside Mauritius since the early ‘80s to diversify our revenue base. Today, foreign-sourced income accounts for more than 50 percent of our profits, and we aim to grow this share further. The bank will pursue its international-growth agenda by selectively exploring business avenues in areas where it has built expertise. MCB will deepen its relationships with major multinational corporations, regional corporates, private-equity funds as well as other entities using the Mauritius International Financial Centre as a gateway for doing business or investing abroad, notably in Africa. Regarding its specialised finance activities, the bank will build on its strong brand and excellent track record to further entrench its commodity-trade finance activity, strengthen its position as a prominent player within the oil-and-gas upstream value chain and reinforce its African power and infrastructure franchise. In parallel, MCB will continue to consolidate its syndication offering and strengthen its position as the lead arranger with financial institutions. To help achieve these objectives, we will pursue our partnerships with peers and strengthen our business network, alongside capitalising on the Group’s presence and our strategically positioned representative offices. The latter play a pivotal role in reinforcing existing coverages and relationships with clients and strengthening risk understanding, identification and management through on-field intelligence while capturing emerging business opportunities. Worth noting, MCB is currently finalising the upgrade of its representative office license in the Dubai International Financial Centre (DIFC) to the Advisory Office under Category 4. Also, in view of the interesting business opportunities in West Africa and our already extensive involvement in Nigeria, we are currently applying for a license to set up a representative office there.
How do you see Mauritius’s banking sector changing over the next few years? And do you believe that MCB is well positioned to accommodate those changes and continue being the country’s leading financial institution?
The operating environment should continue to be quite challenging for some time yet in the aftermath of the pandemic. However, the banking sector is likely to remain resilient and dynamic. We can expect continuous enhancement and sophistication of value offerings amongst key players, emphasizing boosting the recourse of technology to meet the fast-evolving needs of customers. At the same time, industry players are set to pursue their market-diversification endeavours, notably in Africa, in the process-leveraging opportunities emanating from the continuous modernisation of the Mauritius International Financial Centre. In fact, Mauritius can act as a keystone for attracting, managing, structuring and channeling trade and investment flows into Africa while offering a conductive, efficient and secure operating setup to foreign entities on the strength of the country’s intrinsic strengths, including our business climate, investment-grade status, and institutional and governance frameworks, amongst other factors. The recently signed trade agreements with India and China coupled with the African Continental Free Trade Agreement (AfCFTA) and the adherence to regional economic blocs further place the jurisdiction on a strong footing within the Asia-Africa corridor.
At MCB, we remain committed to supporting the country’s socio-economic development as we build back better, focusing on infrastructure and clean-energy investments. The bank will diligently execute its business strategies backed by an improved range of solutions, increased brand visibility and reinforced capabilities in order to consolidate its leadership status on the local front, alongside further extending its frontiers, with a focus, as mentioned, on fields in which it holds strategic competencies and differentiated value propositions. We will pursue the implementation of our digital-transformation program to bolster customer experience through an enhanced value proposition across segments while furthering efficiency gains. Furthermore, as highlighted previously, we are embedding sustainability imperatives in our activities as a key strategic lever to affirm our market positioning and uphold our responsibility as a long-standing economic actor, acting as a force for good.
It certainly appears that you have achieved your goal of being a force for good. Thank you again for answering our questions, Mr. Law Min.