Bahrain aims to become a FinTech hub

Bahrain is urging Islamic banks to embrace financial technology (FinTech) to grow their business by catering to unbanked populations as the kingdom seeks to position itself as a regional financial hub.

FinTech provides a “huge” opportunity for Islamic finance institutions to reduce their costs, increase their investment assets and add more transparency while also promoting financial inclusion by serving people without access to banks, Khalid Saad, chief executive of Bahrain Fintech Bay, told The National.

“Over the next decade or so, I’d like to think of Islamic finance 2.0 would be powered by FinTech,” Mr Saad said.

“Financial inclusion is going to be a big theme that financial institutions can capitalise on.”

Arabian Gulf cities are vying to establish themselves as regional hubs for FinTech.

Kuwait’s central bank last week issued regulatory guidelines for companies experimenting with FinTech products and services. Bahrain FinTech Bay, inaugurated in February, is home to about 30 companies working on cryptocurrencies, blockchain, digital payments and other financial technology.

Abu Dhabi and Dubai are investing

FinTech provides a ‘huge’ opportunity for Islamic finance institutions to reduce their costs and add more transparency

to boost the growth of FinTech start-ups. The number of Mena start-ups is expected to more than double by 2020 from 2015, according to Wamda Research Lab.

In Bahrain, the small Arabian Gulf nation is seeking to attract more FinTech companies and start-ups to to boost the financial service sector’s contribution to GDP, attract investment and create jobs, Mr Saad said.

Bahrain is embarking on a wide-ranging fiscal reform programme tied to a $10 billion aid package from the UAE, Saudi Arabia and Kuwait to help it fill its funding requirements. The 33-page plan aims to ease the debt on the country’s finances and eliminating its budget deficit by 2022.

Bahrain FinTech Bay, the kingdom’s regulatory “sandbox” where companies are able to test ideas under lighter regulations, aims to boost the number of FinTech companies operating in the country.

This can lead to reduced government expenditure through technology, creating new types of jobs and creating a digital economy and sustainable financing, Mr Saad said.

Bahrain’s central bank could not be reached for comment on the anticipated new rules.