Banking & Finance in Seychelles
Issues & Policies
Presented by: Dr. Peter Larose
Geographic Location of Seychelles
from the Map of the World
Located 4 Degrees South of the Equator Line
FOCUS OF THE PRESENTATION
History of the financial services development,
Evolution of Seychelles economic development,
Banking issues in Seychelles,
Types of services offered by banks,
Factors affecting offshore development in Seychelles,
Latest development in banking sector, and
Public finance issues.
A group of 115 Islands lying in the Indian Ocean,
Estimated Population as at end of Year 2006 – 85,000
Official Languages: English, and French,
French Colony in 1790, and became a British Colony in 1811,
Became a Republic in 1976,
Own Parliament and Legislative Systems,
Government headed by President, and currently 11 Ministers,
Civil Law is based on French Napoleonic Code,
Criminal Law is based on English Laws, and
Banking systems follows the International Banking Practice.
Seychelles banking history dates back in the early 1900
during the British colonization era.
No formal banking system existed at that time.
The small population depended on some merchants
(known as trading houses) for basic financial services.
Services were mainly:
Buying and selling of foreign currencies,
1. Acceptance of Deposits using IOU receipts,
2. Cash withdrawals, and
3. Granting of short-term advances using properties as
Foreign currencies were generated mainly from naval vessels
and merchant ships, which called to Port Victoria, while crossing
the Indian Ocean.
Post Office Savings Bank was the FIRST bank to be established
by the British Government in 1902.
Its main function was to mobilize savings from the public.
First international commercial bank was Barclays Bank DCO
to penetrate the local market in 1959.
At that time, there was No Central Bank, and Barclays was
entrusted to carry out most of govt’s transactions including
partial function of the monetary authority.
The birth of the Central Bank of Seychelles emerged from the
the establishment of the Seychelles Monetary Authority in 1978.
It is a public authority established under the Central Bank Act
1982 - amended in 2004 and became an independent institution.
Central Bank’s main functions in the context of Seychelles:
Act as primary advisor the to Govt on monetary & fiscal matters
Provide Clearing & Settlement Facility for banks
Implement monetary policy of the Government
Supervise the banking sector
Manage national debts & foreign exchange reserves
Issue and redeem local currencies in circulation
Liaise with other Central Banks & international financial institutions
Act as Lender of last Resort to the banking community
Stage 1 Pre-Independence
Stage 2 Post-Independence
Stage 3 New Economic Reforms
Colonial Era under the British Rule – Governor Status,
Seychelles was predominantly an agricultural-based
(exports of copra, cinnamon, vanilla, and other spices),
Lack of Legal, Political, Economic, Social, &
The island relied heavily on external donors,
The National Budget was financed by the British
* Legal, Political, Economic & Social changes
* New Economic Vision focusing on Development
* First 5-Year National Development Plan Introduced
* Launch of Macro-economic Objectives
(new employment, stable price, stable exchange rate,
promotion of economic growth)
* Thrust of Economic Objectives
(inward investments, development of Tourism & Fisheries
sectors, emphasis on services)
* Emphasis on Social Programme (free health & education)
♦ Changes in Political Stance – Multi-party Democracy,
♦ Policy shift in favour of Foreign Direct Investment (FDI),
♦ Legislative Reforms to accommodate market-led economics
♦ Promotion of Seychelles as an Offshore Financial Centre,
♦ Promotion of Offshore Banking Sector to supplement
National Income, and
♦ Enactment of Modern Legislations.
Banking Corp Bank
Savings Bank of Baroda
There are 6 commercial banks operating in the economy of Seychelles
Development Bank of Seychelles
Housing Finance Corporation
Property Management Company
Seychelles Credit Union Limited
Insurance Companies (2)
Social Security Fund
Seychelles Pension Fund
One of the Inner Islands – 5-Star Hotel
• Strengths • Strong inter-bank
* Close collaboration transactions, and
between the banks and
specialized financial • Implementation of
institutions, banking regulations
* Regular exchange of rather than penalties.
economic and banking
the local Bankers
• Banks are slow to adjust
• Weaknesses to new development in I.T
* Shortage of foreign systems, and
currencies prevent banks
to expand their
operations, • In the context of a small
island state economy,
there is little scope for
* Corporate strategies of business diversification.
most local banks are
driven by their foreign
* Banking systems can be
easily exposed to
Potential opportunities exist for banks to share the
I.T. network system & save heavy capital investment,
Scope to cross-sell other financial services with
the Offshore Banking sector, and
Scope to list the banks’ shares on the proposed
•Concentration of risk is unavoidable due to lack of
economic sectors diversification,
•Easily expose to systemic risk as a result of inter-
•Economic difficulties can create a slack in business
- hence, massive loan losses, and
* Country-wise is very susceptible to external shocks
Overdraft, Domestic Transfers
Fixed Rate Short Term Loan,
Standing orders instruction,
Variable Term Loan,
Property Construction Loan
Mortgage Finance Loan.
Import & Export credits
Advantages – Internal Factors
There is an Investment Code
Flexible Tax System,
Easy Company Registration Procedure – 24 hours
Fair Legal System,
Low Country Risk,
Sovereign Rating by Sandard & Poors in 2006 (B+)
Friendly Community, and
Abide to International Accounting Standards
Disadvantages – Internal Factors
Shortage of Foreign Currencies,
Inadequate Offshore Specialists,
No Forward Exchange Market,
Heavy Competition from Established Market
Operate in Different Time Zone from Main Market
Advantages – External Factors
Good Communication Systems, and
Anti-Money Laundering Regulations.
Disadvantages – External Factors
International Laws & Politics
Competition from Existing Financial Centres,
Actions by International Monetary Authorities,
Lack of Trading Network Systems, and
A Small Jurisdiction.
Corporate Independence of the Central Bank of
Revision of existing banking laws in line with
New Disclosure requirement for banks on “ Off
Balance Sheet Financing”,
Possibility to introduce Deposit Protection
Insurance & Credit Risk Insurance, and
Implementation of Anti-Money Laundering
The Central Bank of Seychelles has introduced new rules
And regulations concerning terrorist financing,
The authorities are also considering whether to set up a
financial services commission, and
A feasibility is being considered for a stock exchange.
Like all the small island states, Seychelles is suffering from
the small “size-effect”.
The country is short of land space to consider any form of
major industrial development.
The country has been experiencing budget deficits for a
fairly long time – meaning that it had to live on borrowings
both local & international markets in order to survive.
The fiscal policy as a result of continued deficits in the
public finance drives the monetary policy.
The Government issues Treasury bills, bonds, and take
commercial deposits as a means of financing its budget.
The national budget is approved once a year by the
legislative assembly, but in the event of a short fall, there is
a supplementary budget in the mid year.
Government insist on the Central Bank to manage the rate
of interest on savings, deposits, and other financial
The exchange rate or Seychelles rupees is pegged to a
basket of currency (e.g. Seychelles Weighted Tourist &
Trade Basket), whereby the Euros take a high percentage
in the basket.
This is principally due that Seychelles benefits from a lot
of European tourists – a possibility to minimize our foreign
exchange rate risk.
I wish you all,
in your studies.
You Will Visit
Banking & Finance Issues in Seychelles as a Small Island State