Question

How did Financial System Development has promoted Economic Growth in Mauritius??

Answer 1

In the early 1970s, Mauritius supported a mono-crop economy, mainly sugar-dependent, and developed into a multi-sector economy with remarkable per capita income increase. Mauritius successfully diversified into various sectors of an economy such as textiles, tourism, and financial services. But a structural transition occurred in the 1970s as Mauritius moved from the agricultural to the industrial market. The Government has adopted a plan for import substitution with the goal of substantially reducing imports. Unfortunately, no economic growth has been reported.

In 1969, Mauritius underwent some political changes, whereby the Mouvement Militant Mauricien (MMM) won its first election. Nonetheless, the Mauritian economy experienced a boom after the launch of the EPZ during the 1980s and the start of exports. Eventually, the implementation of such an outward-looking approach contributed to economic development.

In the past, the Mauritian financial system consisted mainly of the banking sector, with the establishment of the First Commercial Bank in 1838. In the early 1980s there was a change in the financial system and a need for NBFI's was felt. Since then, the financial sector has flourished since revising the policies.

Mauritius founded in the 1970s one of the first Export Processing Zones (EPZs) in the world. The country agreed in the '90s to set up an International Financial Center that would be what the EPZ's were for the manufacturing sector for the services sector. In the early 1990s, Mauritius faced new challenges in terms of higher wages and increased rate of inflation and seriously challenged the foreign competitiveness of the economy. Two separate bodies, namely: Bank of Mauritius (BOM) and Financial Services Commission (FSC), currently govern and oversee the financial system of Mauritius. The FSC is committed to maintaining the economy as a sound, stable and competitive reputable International Financial Centre. The multinational organization has been experiencing sustained growth since its establishment in 1992. The Freeport was founded with a view to liberalizing the global financial sector. Over the past few years, the global business market has contributed an average of 5 percent of GDP.

Insurance is an important part of the financial sector as it contributes to economic development by encouraging financial stability, savings mobilization, trade fostering and risk reduction. The FSC licenses the insurance/reinsurance firms as well as suppliers of insurance services under the 2005 Insurance Act.

The pension scheme guarantees the security of oldage workers and leads to economic growth and financial stability. The Private Pension Schemes Act 2012 (' PPSA ') was adopted in November 2012, in order to encourage and control the pension sector in Mauritius.