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Improving the Enabling Environment for for Long Term Finance in Mozambique

Program Development Objective (PDO)

The program’s objectives are to strengthen the capacity to regulate, supervise, and improve the enabling environment in the pension and insurance sectors as social safety net providers in Mozambique. Strengthening these sectors will contribute to increasing the supply of domestic long-term funding. The program also aims to help authorities develop a local bond market by implementing measures to increase transparency and liquidity for government and nongovernment bond markets, introducing new financial instruments, and expanding the investor base. Developing bond markets will, in turn, provide these sectors with more investment opportunities for diversification. 

Background

The government recognizes the importance of the financial sector for development, which will help reduce poverty and improve the business environment. Toward that end, the Mozambique Financial Sector Development Strategy 2013–2022, which was developed with the assistance of funding from the FIRST Initiative, was adopted to provide a vision and a comprehensive and detailed roadmap for reforms in the financial sector. The strategy specifically sets a goal to develop long-term financial markets in Mozambique. This can be achieved by (a) developing the government bond primary and secondary markets and (b) increasing the supply of private capital to support private sector development through improvements to the mobilization and investment of long-term funds, of which pensions funds and insurance companies can be an important source.

Activities

This program will implement the following key activities: 

Pension 
    1.  Developing comprehensive oversight of private pensions 
    2.  Managing public sector scheme assets
    3.  Expanding pension coverage

Oversight of the insurance sector
    1.  Building capacity for insurance supervisory staff on risk-based supervision 
    2.  Updating the supervisory manual 
    3.  Enhancing the reporting system 
    4.  Reviewing inspection procedures 

Fixed-income investment vehicles 
    1.  Drafting second generation of government bond market reforms (building on the current FIRST
         Initiative program)
    2.  Expanding the nongovernment bond market 
    3.  Expanding the investor base for government and nongovernment bonds 
    4.  Improving price dissemination and secondary markets of government and nongovernment
         bonds 

Expected Outcomes

The expected outcomes of the project are as follows: 

Pensions 
    1.  Strengthening oversight framework and building of capacity
    2.  Strengthening management of public sector scheme assets
    3.  Implementing measures to expand pension coverage

Oversight of insurance sector
    1.  Strengthening supervision framework and capacity for the whole insurance sector

Fixed-income investment vehicles 
    1.  Harmonizing planning and issuance procedures for treasury bills and government bills 
    2.  Improving efficiency, transparency, and liquidity of the government bond markets 
    3.  Establishing enabling legal framework for nongovernment bond issuance
    4.  Establishing enabling legal framework and infrastructure for institutional investors