FinTech can reposition Bahrain as a ‘pioneer’ in the global financial market, according to Bahrain Economic Development Board (EDB) managing director Simon Galpin in a research interview with FinTech Global.
The Middle East has lagged behind London, Europe and East Asia in terms of the number of FinTechs and the technology emerging; however, Galpin believes EDB is helping to change the tides. Galpin said, “What we lack in terms of scale, we are making up for in momentum. Things are changing very quickly in this region. One of the advantages of not being a first mover is the fact that you can learn from other people’s mistakes, and you can cherry pick some of the regulations that are clearly working in other parts of the world.”
This change has led the Bahrain Economic Development Board working together with the central bank to help implement regulatory framework that creates an environment ‘truly attractive’ for FinTechs and startups around the world. Over the past year, the EDB has helped to implement crowdfunding regulatory framework and supporting Central Bank of Bahrain’s newly established regulatory FinTech sandbox to help companies test new products. The new regulations make the country the only in the region which doesn’t have restrictions on selling the solutions outside of select financial zones.
Last year, EDB teamed with the FinTech Consortium to launch Bahrain FinTech Bay, which is a FinTech hub for the Middle East and Africa. The hub, which is set to launch in February, will accelerate the development of FinTech companies in the region by connecting them with investors, entrepreneurs, government bodies and financial institutions. EDB has already seen a number of companies register for the hub, of these, several have been payment technology providers.
The Middle East has begun to see an influx of activity last year. Bahrain-headquartered PayTabs, a payment processing solution, received a $20m funding round to support its international expansion, with the EDB being one of the backers in the round. The region also boasts FinTech HIVE, an accelerator programme launched by Dubai International Financial Centre to support 11 startups from around the world.
Galpin said, “We see FinTech as a chance to reposition Bahrain as a pioneer once again, and show that while Bahrain is a small economy, it’s a nimble one and is able to introduce new technology particularly in the financial space.” The EDB is hoping FinTech can help to rebrand the country, so more technology companies use the country as a way to enter the region’s market. Targeting FinTechs that are successful in their home markets and looking to scale is a key area for the regions development. The hub can serve as a way to test their products and ensure they meet the right regulations for consumers in the region.
“The trouble is, everywhere is trying to be a FinTech hub, so we’ve got to focus on bits that make us a little bit special and different. Size is something that makes us special, because sometimes being small is an advantage. Being a small economy means you have access to the central bank, decision makers and potential partners and investors.”
Shariah compliant solutions
Bahrain has been a financial centre for the past 20/30 years and has played a key role in developing Islamic banking. “A lot of people have overlooked developing FinTech products that are suitable for Islamic banking. We feel Shariah compliant FinTech is another unique opportunity for Bahrain to make a splash,” Galpin added. By taking a traditional FinTech platform and making it compliant, not only enables it to be sold across the Muslim world, but also draw on a wider pool of investors, such as Islamic banks and private equity firms.
One of the advantages of the Middle East is that it is built up of different types of economies, with countries like Egypt that have a big population, countries like Saudi Arabia that have a lot of wealth or ones that are small, like Bahrain, but are flexible and offer a lot of access. Having a range of economies like this allows companies to start up in one area, but then tailor a solution so it fits to another market, Galpin said. However, the biggest benefit is building a shariah compliant product as that can be sold not just across the region, but around the world to countries like Indonesia and Malaysia.
The big sectors in Bahrian FinTech
EDB has already received a number of companies register for its FinTech Bay, and of these a high percentage are payments and blockchain related. “The reason these companies see opportunities here, is that across the region we have a sizable part of our population which are unbanked. So, developing payment systems that can cater for that large and growing section of our population is seen as quite a big market in the future,” Galpin added. These companies are building solutions for people that don’t have a formal bank account and instead of using a traditional remittance agency they can use a mobile app to make the transfer.
Galpin believes that due to the country having a young population and a high mobile phone penetration rate, there is a big scope for mobile banking and remittance companies. “There’s some really good niche areas where the Middle East and Bahrain need not necessarily be a follower but could actually take a lead in the future,” he said.
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