"Financial institutions, banks in particular, must understand that SMEs will be at the centre of our growth strategy - we therefore need a financial system that can respond positively to the needs of these businesses," Mr Sithanen stated at the opening of a seminar in Mauritius organised by the State Bank of India, which has a 51 per cent stake in Mauritius's Indian Ocean International Bank.

The Mauritian government is hoping that investment in new areas of the economy will help combat the threat of rising unemployment as the European Union seeks cuts in sugar subsidies.

In November, the African, Caribbean and Pacific Group of States (ACP) circulated details of a proposed new EU sugar regime, complaining that the EU's own recent proposals are far too harsh, and that it continues to subsidize its own refiners. The proposal comprised a net price cut of 19% spread over 8 years starting in 2008 with the retention of refining aid of 5.1%. This compares with a dramatic 39% cut over two years which had been proposed by the European Commission.

An informal deal was later reached by European agriculture ministers under which EU sugar prices will fall by 36% over the next four years, but this is scarcely better for the ACP.

EU farmers will receive compensation for 64.2% of their losses, and will have access to a €7.5 billion restructuring fund.

Sithanen stated that the banking sector needed to bring its financial offerings up to date to help foster greater innovation in the Mauritian economy, and revealed that the government wants commercial banks and non-bank financial institutions to play a greater role in helping businesses access finance.

"Most financial products and services, in particular in the banking industry, have been designed for that purpose, with very little innovation in the past 20 years," he observed.