A bid for a fairer banker

Our economic commentators love to speak of Mauritius as a sophisticated international financial hub, yet our domestic credit architecture remains trapped in a colonial paradigm of risk aversion and rent-seeking. For decades, the local banking duopoly has enjoyed the comfort of outsized interest rate spreads—frequently hovering around five per cent—extracting rent from productive enterprises while offering peanuts to everyday depositors.

When the Bank of Mauritius adjusts its policy instruments, the transmission mechanism is invariably lopsided. A hike in the repo rate to protect the under-siege Mauritian Rupee transforms instantly into steeper borrowing costs for local small and medium enterprises. Yet, the corresponding yield for savers crawls upward at a glacial pace. The system is structurally wired to socialise the risks of currency depreciation while privatising the margins.

To break this gridlock, we must reject the simplistic binary of laissez-faire complacency versus blunt regulatory caps. Forcing a rigid drop in the interest spread to an arbitrary two per cent would simply trigger an immediate credit freeze by hyper-conservative risk committees, leaving local businesses entirely starved of capital. Conversely, relying solely on heavy corporate taxation treats the symptom rather than the systemic disease.

What the Mauritian economy requires is a surgical recalibration: a tiered 25 per cent corporate tax rate intertwined with a compressed 3.5 per cent spread framework, underpinned by an elevated policy rate to guard our battered currency.

By tying a lower tax threshold exclusively to productive domestic lending, we reverse the incentives for hoarding. If our financial institutions choose to park their excess liquidity in zero-risk government papers, they should face a punitive 35 per cent fiscal penalty. If they choose to absorb the risk of local entrepreneurship, agriculture, and green industrialisation, they deserve a tax shield.

A compressed 3.5 per cent spread within a higher repo environment ensures that depositors are finally rewarded for holding the Rupee, stemming the tide of capital flight. Simultaneously, it forces lenders out of their rentier comfort zone. We do not need a banking sector that merely manages safety metrics; we need a financial engine that fuels real-economy wealth creation. It is time our fiscal policy treats banking not as a protected guild, but as a public utility for national development.