Fostering Financial Innovation – A fresh approach to regulation 

On the back of the recent OESAI Conference in Mauritius, I had the pleasure of interviewing Mr Vikash Thakoor, the Chief Executive of the Financial Services Commission, Mauritius. (FSC)  

He shared insights of the role of the FSC in regulating the financial services industry while fostering innovation and collaboration. With a distinguished background in information technology and extensive experience in the financial services sector, Mr Thakoor’s perspective is invaluable in understanding the intersection of regulation, technology, and innovation. 

He started with a reflection on the successful 45^th Annual OESAI (Organisation of Eastern and Southern Africa Insurers) Conference held in Mauritius, highlighting the enthusiasm and large turnout, and emphasising the significance of such events in nurturing collaboration and knowledge sharing among financial industry professionals. 

Mr Thakoor attributed the success of the Mauritius financial services sector, and well-established reputation across the African continent to the FSC’s mission and dedication to ensuring that all financial activities within Mauritius adhere to regulatory frameworks. 

The Core Mission of the FSC 

He underscored the primary mission of the FSC: to ensure that financial activities are conducted within the bounds of the law. He emphasised that regulations serve as the foundation for a stable financial environment, protecting at the same time operators, investors and consumers. The FSC continuously monitors financial activities, adapting regulations as needed to fit market developments and changing business demands. 

One distinguishing feature of Mauritius’ regulatory environment is its flexibility. Mr Thakoor explained that the country’s Finance Bill allows for minor amendments to laws, provided they are mentioned in the National Budget Speech. This unique flexibility enables the FSC to swiftly respond to emerging trends and maintain a regulatory framework tailored to the needs of financial services providers and consumers. 

Regulating Emerging Technologies 

Highlighting the challenges posed by emerging technologies like robo-advisory services and virtual assets, Mr. Thakoor explained the FSC’s proactive approach to regulating these areas: 

• Robo-Advisory Services: The FSC has issued guidelines for firms interested in offering robo-advisory services in the financial services sector. These guidelines aim to ensure transparency and protect both investors and consumers by setting clear expectations. Regulated providers are held accountable for the quality of their services, fostering trust and accountability. 
• Virtual Assets: In response to the rapidly evolving virtual asset space, which includes cryptocurrencies like Bitcoin, a survey was conducted by the FSC and a surge in virtual assets transactions was discovered, including concerns about potential money laundering. To address these issues, the FSC collaborated with the World Bank to elaborate the Virtual Assets and Initial Token Offering Services Act 2021. This framework allows the FSC to grant licenses to various categories of virtual assets service providers, promoting transparency and consumer awareness while mitigating the risks associated with these assets. 

Cross-Border Collaboration 

The FSC CE highlighted the importance of collaboration between countries, particularly in regions like Eastern and Southern Africa. He referenced the OESAI’s mission to foster collaboration between insurers across borders. Mr. Thakoor emphasised the necessity of harmonising rules and regulations to create a consistent and fair marketplace. He also pointed out the example of harmonisation efforts within SADC and CISNA, which have successfully aligned banking and insurance regulations across countries, facilitating cross-border operations. 

The Regulator’s Role in Innovation 

With his background in information technology, Mr. Thakoor expanded on the crucial role of regulators in stimulating innovation within the financial services sector. He outlined that regulators should encourage innovation to level the playing field for both established and new market entrants. Here he identified three key factors for regulators: 

• Understanding Technology: Regulators must fully understand emerging technologies and their implications. This knowledge equips them to create regulations that encourage innovation while safeguarding the interests of investors and consumers. 
• Adaptability: Regulators should adapt regulations to accommodate technological advancements. Mr Thakoor advocates for the use of sandboxes, allowing businesses to test innovative ideas while regulators refine regulations accordingly. 
• Proactive Approach: In developing nations, regulators may need to take a more hands-on approach, actively shaping the market to ensure its stability and security. 

Mr Thakoor went on to underscore the importance of creating a level playing field, ensuring that innovation benefits everyone, rather than a select few with significant resources. He pointed out that regulators must strike a balance between encouraging innovation and maintaining rules and regulations that protect consumers and promote financial inclusion. 

He concluded by discussing a groundbreaking initiative in the Mauritius insurance sector: the National Insurance Claims Database. This system will enable insurance companies to access essential information about drivers and vehicles, allowing for personalised premium calculations and streamlining the claims process. The FSC’s involvement in this project demonstrates its commitment to fostering innovation within the industry. 

Mr Vikash Thakoor’s insights provide a comprehensive view of the Financial Services Commission’s mission and its proactive approach to regulation in Mauritius.  

The country’s flexibility, adaptability, and commitment to innovation set a positive example for the financial services industry in Africa and beyond.