As an archipelagic state, the Maldives has made significant strides in overcoming the infrastructural and logistical barriers to delivering basic financial services to its people. Mariyam Hussain Didi, Assistant Governor of the Maldives Monetary Authority, explains what’s behind the country’s success so far.
Globally renowned for its sandy beaches, crystal clear waters, and sunny disposition, the Maldives is now ambitiously expanding its identity beyond its natural allure. The ongoing Maldives Payment System Development (MPSD) project, led by the Maldives Monetary Authority (MMA), aims to revolutionize the financial sector and payment landscape through cutting-edge technology. Central to this nationwide initiative is financial inclusion – helping a population of just over 400,000 smoothly transition to the digital era.
Remarkably, over 90 percent of the country’s adult population own a bank account, and more than 85 percent have access to the internet via mobile devices. These statistics are particularly impressive for an archipelagic state and underscore its robust potential for digital financial services expansion. However, our journey comes with its own unique obstacles. The Maldives grapples with infrastructure deficits, unequal distribution of bank branches and ATMs among its islands, and limited banking hours – factors collectively stifling access to swift, efficient, and affordable financial services.
To address these impediments, the MMA launched its Instant Payment System (IPS) – known as ‘Favara’ – on 26th August 2023, under the MPSD Project. ‘Favara’, a term derived from local Dhivehi words for the system’s three key features – ‘Faseyha’ (easy), ‘Vaguthun’ (instant), and ‘Rahkaatheri’ (secure) – reflects the MMA’s commitment to providing expedient and reliable services around the clock, through its network of banks and Payment Service Providers (PSPs).
Curated to address specific market needs, Favara complies with the international ISO 20022 standard, ensuring interoperability among its participating banks. Before Favara, all funds transferred via (MMA-operated) inter-bank payment systems took up to 24 hours to reflect in the recipient’s account. Now inter-bank fund transfers are instantaneous, irrespective of geographic location or banking affiliations. Additionally, Favara Transfer services enhance transactional security with Account Verification Services – previously limited to intra-bank transactions – ensuring funds reach their intended recipients safely.
The system also introduced three brand-new services that take customers’ evolving needs into account. This includes Favara ID, allowing customers to link an easy-to-remember alias, such as a phone number, an email address, or a National Identification Number to their bank accounts. Transactions can be initiated using any of these aliases – known as the customer’s ‘Favara ID’ – instead of having to share lengthy bank account details. And, with Favara Request, customers can send payment requests to others, requesting or reminding them of an outstanding payment. Upon approval of such requests, payments are processed automatically in real-time. This service also caters to businesses seeking innovative invoicing solutions or simplified payment collection processes. Finally, Favara Recall provides customers with a streamlined way of reporting erroneous or fraudulent transactions and having them investigated and/or refunded directly through the system.
The launch of Favara lays the foundation for the fundamental changes the MMA is planning for the Maldives payment landscape in the coming years. The MMA recognizes that, with this new infrastructure, comes the responsibility to strengthen the country’s regulatory framework for payment systems and services. As a result, the National Payment System Act and the Regulation on Payment Services were published in 2021 and 2022, respectively, to ensure the system’s safety, efficiency, and reliability.
In addition to ensuring interoperability among all service providers in the market, the MPSD project aims to provide fair opportunities for all PSPs to help them prosper. By encouraging non-bank PSPs to become participants in Favara, the full benefits of interoperability can be achieved, while also boosting sectoral competition and innovation.
At the MMA, we acknowledge the long road ahead in keeping up with our regional and global counterparts when it comes to embracing new technologies. That said – despite still being in its initial stages – Favara has already produced some promising statistics that point towards a bright future for the Maldives payment landscape:
Favara was launched with just three participating banks out of the eight currently operating in the Maldives, with a single transaction limit of MVR 50,000 applied for the initial period. Despite this, the system processed well over 88 thousand transactions with a total value of more than MVR 359 million (approximately USD 23.2 million) during its first month of operation alone. In comparison, the Automated Clearing House (ACH) – which processes transactions up to MVR 100,000 – processed a monthly average of 68 thousand transactions with a total value of MVR 399 million (approximately USD 25.8 million) during the current year.. This is a strong indicator of Favara’s potential, especially given that all the banks and PSPs are yet to be onboarded to the system.
The MMA takes great pride in facilitating this major step towards the future of payments in the Maldives and we count on the full cooperation of all banks and PSPs to ensure that customers are always at the receiving end of the highest quality payment services.