According to CareEdge Ratings: The Banking Sector Well Positioned to Support the Economy in the Medium Term

According to CareEdge Ratings, supported by robust balance sheets, resilient financing, and the rise of digitalization, the Mauritian banking sector maintains a strong position to support economic activity in the medium term. However, behind this stability, risks are gradually embedding themselves in the landscape.

Context

The Mauritian banking sector remains firmly established, backed by strong capitalization, abundant liquidity, and solid recurring revenues. "This resilience persists despite a normalization of profitability due to rising financing and operational costs," emphasizes CareEdge Ratings. Concurrently, non-banking deposit institutions are experiencing rapid expansion. However, CareEdge Ratings notes that the growing concentration of household credit increases sensitivity to interest rates and the cost of living. "While asset quality remains generally stable, risks are becoming more concentrated in unsecured and consumer-related portfolios."

Another observation is that risks to financial stability remain contained, thanks to strong buffers in banks and insurance, even though external and macroeconomic threats could weigh on growth, margins, and revenue volatility, without compromising solvency or liquidity.

Sector Outlook According to CareEdge

Banking Sector
The Mauritian banking sector is well positioned to support economic activity in the medium term, thanks to the strength of its balance sheets, resilient funding profiles, and the rise of digitalization. Credit growth is expected to remain moderate but positive, driven by households, businesses, and activities related to international financial centers. However, downside risks could intensify in the event of a prolonged geopolitical shock, especially if crude oil prices remain high. Such a situation would fuel imported inflation, limit the maneuvering room for economic policies, increase the cost of credit, and weaken demand. Banks might then tighten their lending conditions, particularly for SMEs, energy-intensive sectors, transportation, aviation, and unsecured consumer credit. Although systemic stress remains unlikely due to strong buffers, this context could slow credit growth and increase risk premiums, leading to an adjustment in the structure and cost of financing without breaking the credit cycle in Mauritius.

Non-Banking Sector
In the realm of non-banking deposit institutions, growth is expected to slow while remaining positive, in line with developments in nominal income and household credit demand. However, the operational environment is likely to become more constrained due to high-interest rates and rising living costs, which could undermine borrowers' repayment capacity. In a system heavily exposed to household credit, asset quality could come under pressure, particularly in unsecured and consumer-related segments. While current levels of capitalization and profitability still provide comfortable safety margins, the sector's resilience will depend on increased discipline in lending, stricter eligibility criteria, and prompt and adequate provisioning.

CareEdge Africa Ratings

Leasing (Credit-Lease)

Other Non-Banking Financial Institutions

What CareEdge Predicts: "Overall, risks remain manageable but tilted to the downside, particularly in a context of prolonged monetary tightening or labor market deterioration. Financial stability remains preserved: asset quality should remain stable, with a contained non-performing loan ratio in the absence of a major external shock. Strong capital and liquidity cushions continue to provide significant protection against turmoil, enhancing the sector's capacity to absorb shocks related to rate volatility, rising financing costs, or weakening demand."

Key Figures to Remember

5.6%
In 2025, the monetary intermediation sub-sector accounted for 6.7% of gross value added (GVA). According to Statistics Mauritius, its growth is expected to reach 5.4% in 2026, a slight slowdown from the 5.6% recorded in 2025.

12.7%
The loan portfolio remains the cornerstone of the banking balance sheet, showing a year-on-year increase of 12.7% to reach Rs 1,198.7 billion by the end of January 2026, fueled by continued strong demand for credit from both households and non-financial enterprises.

Rs 201.9 billion
Credit to the private sector grew by 11.2% year-on-year by the end of January 2026. Specifically, household loans increased from approximately Rs 180 billion in January 2025 to Rs 201.9 billion a year later, reflecting a rise of 12.1%. Meanwhile, financing granted to non-financial enterprises increased from around Rs 200 billion to Rs 218.9 billion.