The Maldives Monetary Authority (MMA), the central bank, has stated that it has not declared the Bank of Maldives' (BML) efforts to acquire the SME Development Finance Corporation (SDFC) as illegal.

MMA sent this message to the media today in response to some media reports claiming that MMA had decided BML's efforts to acquire SDFC were illegal.

MMA said that based on the information received regarding BML's proposed transaction to acquire SDFC, they have reviewed whether the bank followed the necessary procedures in conducting the transaction, in line with the authority's general principles.

"This authority has not determined that the work being done by the Bank of Maldives to acquire SDFC is in violation of the Maldives Banking Act," MMA stated.

MMA said that according to the information shared by BML, the bank has assured that all aspects of this business transaction will be carried out in accordance with relevant laws, regulations, and procedures.

The cabinet decided last Sunday to sell the government's shares in SDFC, which was established to provide loans to small and medium enterprises, as proposed by BML.

BML stated in a release that day that with this agreement, SDFC will provide Islamic financing services to the country's micro, small, and medium enterprises (MSMEs) with the most modern technology.

Under the new strategy of this digital bank, financing will be prioritized for startups, women-owned businesses, fishermen, farmers, agricultural businesses, sustainable businesses, and e-commerce sectors, according to BML.

BML said the purpose of acquiring SDFC is to pave the way for digital transformation of MSME banking in the Maldives, increase financial inclusion, and enhance the self-sufficiency of the Maldivian economy by utilizing the bank's strong financial position, extensive network, and growing digital banking experience.

BML's CEO, Mohamed Shareef, said that the MSME sector served by SDFC plays a crucial role in the country's economic growth and innovation.

"With this decision, we will continue to work on providing the most modern banking experience to MSMEs in the Maldives through our digital-first subsidiary with Islamic banking services," Shareef said.

The digital-first subsidiary, which is set to operate as a BML subsidiary, will disburse more finance than the total proportion SDFC has been disbursing. The financing will be provided with the favorable terms that SDFC has given to MSMEs.

BML's goal is to disburse MVR 500 million in financing through this subsidiary in the first year. Additionally, MVR 300 million will be invested over three years through the Maldivian Islamic Social Financing Initiative (MISFI) to support community development and sustainable business growth.

BML said further details regarding SDFC's operations and governance will be disclosed by the bank in the future.

According to the President's Office, BML's proposal for acquiring SDFC includes disbursingv MVR 1.9 billion in loans over the next five years.