A feature article in the Maldives Monetary Authority’s (MMA) inaugural Island Economist publication is calling for a carefully calibrated approach to capital market development, warning that investor appetite is rising faster than the country’s capacity to offer safe, productive investment channels.
The piece, titled “Balancing Trust and Transformation: Reflections on Capital Market Growth”, is authored by Eelaf Naseer, an investment and policy research professional at the Maldives Pension Administration Office, and examines how the Maldives can deepen its capital markets without undermining investor confidence or financial stability.
Market Cap Up, Liquidity Stuck
Eelaf frames the current situation as a “chicken and egg” problem: participation and confidence are mutually dependent, yet both remain constrained.
Since the last equity listing in November 2019, the market capitalisation of the Maldives Stock Exchange has more than doubled, rising from around MVR 16 billion to MVR 36 billion. However, only about 9% of listed value trades with any regularity, and no new companies have come to market in over five years. Trading volumes have remained modest despite strong price performance.
The article notes that this growth has been driven almost entirely by asset appreciation, not by broader market participation or new listings, raising questions about depth, liquidity and price discovery.
Gemcue Collapse Highlights Unmet Demand
The analysis points to the collapse of the Gemcue pyramid scheme in mid-2025 as a stark indicator of latent demand for yield-bearing assets among Maldivian savers. The scheme, which promised AI-powered cryptocurrency returns, attracted a large number of participants before imploding.
Eelaf argues that this episode revealed two realities at once: investors are actively seeking higher returns, and regulated alternatives remain too limited. “The appetite for yield-generating instruments clearly exists. What remains insufficient are the institutional mechanisms to channel it productively,” the article states.
Structural Constraints and Legacy of Relationship Banking
The feature underscores that part of the challenge is structural. With a population of around 530,000, the Maldives naturally has a shallow investor base. Household savings largely remain in bank deposits earning 4–5% per year, even though recent corporate bond issues have offered returns closer to 7%. The article notes that around MVR 8 billion still sits in deposits, suggesting that barriers to market participation go beyond simple yield differentials.
Eelaf traces this to the historic dominance of relationship-based banking. Modern banking arrived with the State Bank of India in 1974 and the establishment of the Bank of Maldives in 1982, enabling family-owned conglomerates to access credit quickly based on collateral and long-standing relationships, without extensive public disclosure. Banks still hold a major information advantage through real-time visibility of client cash flows, making bank finance more straightforward for many corporates than public issuance.
“What worked during rapid sectoral development now constrains diversification,” the article observes, particularly as institutional investors demand greater transparency and liquidity.
Pension Growth Amplifies Need for Market Reform
The Maldives Pension Administration Office now manages MVR 26.2 billion in assets, equivalent to roughly 23% of GDP, and is projected to exceed GDP within a decade. These long-term savings require transparent, tradable instruments for effective asset allocation.
Eelaf warns that without sufficient domestic investment vehicles, growing pension assets risk creating systemic concentration in a narrow set of instruments, rather than being deployed into diversified, productive investments that support national development.
Regulatory Architecture: Progress and Gaps
The article notes that regulators and market institutions have already taken tangible steps forward:
-
The Viyana Board has facilitated more than MVR 500 million in private placements, providing a streamlined path for corporate debt issuance.
-
A centralised disclosure platform has improved transparency and reduced administrative friction.
-
Automated trading systems have lowered transaction costs and modernised the trading environment.
However, the article emphasises that critical gaps remain, especially in:
-
Investor protection, including better monitoring of how raised funds are deployed and stronger debt-recovery frameworks.
-
Proportionate regulation, with tiered requirements that allow smaller issuers to access markets without facing compliance standards designed for much larger entities, while still preserving the transparency institutional investors need.
-
Market infrastructure, such as domestic credit rating agencies, independent research coverage, and stronger underwriting capacity.
To address coordination challenges, forum participants cited in the article have proposed the creation of a Securities Exchange Council bringing together government ministries, regulators and industry to align capital-market development with broader economic priorities.
Strong Returns, Weak Depth
In a section titled “Conditions for Convergence”, Eelaf highlights that the MASIX index delivered annualised returns of 17.2% between 2020 and 2025, outperforming major international benchmarks such as the FTSE and S&P 500. Yet this strong performance occurred without any new equity listings since 2019, and trading remains episodic, with volumes reaching MVR 1.5 million in 2024 before falling to MVR 132,000 in 2025 year-to-date.
This combination of high returns, idle deposits, rapid subscription of recent bond offerings and the widespread reach of Gemcue is presented as clear evidence that demand is not the problem. The priority now is “translating demand into productive channels,” the article stresses.
Climate and Ocean as a Strategic Investment Theme
Looking ahead, Eelaf argues that the Maldives should leverage its distinctive economic identity, climate vulnerability and ocean dependence—to shape a differentiated capital-market proposition rather than importing generic models.
The article calls for the development of project bonds, thematic funds and sustainability-linked debt anchored in tourism sustainability, marine resource management and renewable energy infrastructure. It also advocates embedding climate-related disclosure into standard reporting frameworks so investors can properly assess long-term risk in a climate-exposed economy.
“Transparency builds confidence only when investors possess the capacity to interpret and act on information,” Eelaf notes, linking disclosure reforms to broader financial literacy initiatives.
Trust and Innovation Must Advance Together
Concluding the piece, Eelaf contends that the central challenge is not choosing between regulation and innovation, but ensuring they advance in synchrony. Regulation, she writes, “provides the architecture that enables trust,” while innovation “provides the activity that demonstrates value.” Both are needed to convert accumulated savings into the investments the Maldivian economy requires
advertisment
advertisment
