witnessed the establishment of its first islamic commercial bank. islamic finance extended quickly to other parts of the world, most of which during the past thirty years or so. other maghreb countries, morocco and tunisia began the experience of islamic finance by allowing conventional banks to offer certain islamic products but these institutions are faced with strong competition from the region ’ s conventional banks. remarkably, sudan only established its first sharia - compliant bank in 1977 and the country ’ s islamic economic system has since then been continuously developing. sudan is the only country in this part of the world to have a wholly islamic financial sector. within sub - saharan africa, south africa led the way, with one of the largest international islamic banking conglomerates namely al - baraka banking group having been present there for the last 20 years alongside other institutions conducting islamic finance in the country. more recently, other countries have joined the league namely kenya, tanzania, botswana and nigeria. governments of ghana, uganda, ivory coast, somalia, malawi and zambia are working towards introducing islamic banking in their respective countries. presently, the african continent hosts over 250 islamic financial institutions that offer islamic financial services including islamic banks, takaful companies, islamic funds, mudarabahs and islamic microfinance. noteworthy also is that over the last two years, the african continent has demonstrated interest in creating an islamic capital market via initiatives for issuance of sovereign sukuks in a few countries including nigeria, kenya, south africa and senegal. as of date, two countries have successfully issued their soveriegn sukuks namely sudan and gambia. the rapid pace of the development of islamic finance leaves no doubt among policy makers all over africa including mauritius that islamic finance presents many prospects for development. considering africa ’ s population of nearly one billion people, half of which are of muslim faith, and the numerous hurdles to financial access on the continent, islamic finance could become a key factor in the promotion of financial inclusion by appealing to a large muslim population in certain parts of africa. the mauritian experience ladies and gentlemen, over the past three years, the mauritian authorities took some initiatives towards the promotion of islamic banking and finance in our jurisdiction. bis central bankers ’ speeches • the banking legislation has been amended to enable banks to conduct islamic banking business exclusively or through a window ; • fiscal reforms were brought in to eliminate tax disadvantages that would otherwise have materialised in the islamic mode of finance ; • we joined the ifsb to facilitate the rapid development of islamic

an adversely stressed scenario. the objective is to examine if the bank has the financial muscle and strength to withstand shocks. the bank, along with the prized assistance of an econometrician, associate professor, jameel khadaroo, of the university of mauritius, has developed a stress testing framework for producing a suite of macro - prudential models for in - house use by the staff of the bank. the findings of the last stress testing exercise indicated that the domestic banking sector is indeed strong and resilient to shocks with some grey areas that need close monitoring. i need to share with the audience two more findings : a reduction in interest rates sustained over a long period of time with a view to stimulating the economy tends to raise credit risk, measured in terms of nonperforming loans in sectors like manufacturing, construction and personal. a depreciation of the rupee aiming to promote the export sectors reduces credit risk in the manufacturing and tourism sectors but it increases the credit risk to the trade sector because of our dependence on imports. six months have gone by since the protocol on the double tax avoidance agreement was signed. it was feared that the revision of the agreement would trigger a flight of global business deposits. at the end of march 2016, aggregate deposit liabilities of the banking industry stood at rs855 billion, out of which gbc deposits were rs320 billion. rather than dropping as initially feared, gbc deposits had gone up to rs350 billion by the end of september last. even after allowing for exchange rate effects gbc deposits have increased considerably in the last six months. the rising level of gbc deposits, despite the signing of the protocol, does not go to say that the bank or anyone of us should be complacent about. with the expiry of the grandfathering clause by 2019, the risk of an erosion of the deposit base of banks is clear and present unless all participants in our jurisdiction come up with innovative and meaningful business strategies. already, there are indications of a growing demand for mauritius to position itself as treasury centres for multinationals operating in africa. a few international banks are actually engaged in promoting this business. the bank of mauritius stands ready to support such initiatives. a drop in gbc deposits would deprive the country of foreign exchange inflows for the financing of the current account deficit. the bank had feared that a drop in gbc deposits would adversely impact on the liquidity positions of banks. a