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How Bahrain plans to become a regional fintech hub

Bahrain is a small island with big plans for its financial technology industry

This article can also be found in the Premium Editorial Download: CW Middle East: CW Middle East: Bahrain aims to be fintech hub

Bahrain’s government wants to make the country the go-to place in the Middle East for financial technology companies (fintechs). With the dawn of the digital age, it hopes to capitalise on its banking know-how to establish an ambitious fintech “ecosystem”.

Bahrain currently hosts about 400 domestic, regional and international financial institutions. According to Khalid Al Rumaihi, CEO of the country’s Economic Development Board (EDB), there is a “national keenness to explore collaboration between banks and fintechs to adopt innovative solutions”.

“Key factors supporting the fintech ecosystem include Bahrain’s human capital, a highly progressive and liberalised ICT infrastructure and our increased push to drive entrepreneurship,” said Rumaihi.

Globally, the fintech sector attracted 1,824 investment deals totalling $14.2bn of venture capital investment in 2017, according to the Bahrain fintech ecosystem report 2018. Within the Middle East, the number of fintech startups is expected to reach 250 by 2020, said the report.

Bahrain’s government has implemented a number of initiatives to pave the way for the country to become a regional fintech hub. Last year, the kingdom’s central bank launched a dedicated fintech and innovation unit, including a regulatory sandbox, which provides a testbed for fintech startups.

Bahrain has also announced an aggressive nationwide “cloud first” policy that sets the tone for the nation’s ambitious digital strategy. More recently, the kingdom established Bahrain Fintech Bay (BFB), which bills itself as a one-stop shop for fledgling fintech companies.  

A private-public partnership between the EDB and the Singapore-based FinTech Consortium, BFB provides a physical co-working space for local fintech companies, supported by corporate incubation and fintech initiatives.

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Fintech entrepreneurs may also benefit from Bahrain’s newly announced $100m VC Fund of Funds, which has opened up new funding avenues for fintech startups, further strengthening an ecosystem that benefits from multiple accelerators and tailored government support for startups.

Khalid Saad, CEO of BFB, told Computer Weekly that the development of Bahrain’s fintech ecosystem is a top priority. “This will be driven by regulatory enhancement, talent development, wider adoption of cloud and blockchain, increased investments and interaction between traditional financial institutions and fintechs,” he said. “Bahrain will continue to take the necessary steps to create the ideal and open environment in which fintechs can thrive.”

BFB is currently 90% occupied by local, regional and international players and is backed by more than 30 founding partners, including Arab Financial Services, American Express, Cisco, National Bank of Bahrain and Gulf International Bank.

Saad added: “We have created a platform that allows fintech players to see how they can contribute back to the ecosystem. There are a lot of opportunities for collaboration; we are not trying to reinvent the wheel. Fintech touches on so many verticals – we are happy to collaborate with anyone.”

Open to all

He stressed that the organisation is “open to all”, not just pure fintech companies. “We are open to banks and non-traditional financial institutions,” he said. “It’s not just financial companies that are shaking up fintech. If you look at Google and Apple, for example, they are also coming into financial services.”

A central goal of BFB is to help connect larger corporates with fintech talent, said Saad. “We can help the fintechs showcase their tech through our network. We can open doors for them to explore commercial opportunities, which is key.”

Saad stressed that the global fintech industry is still in the early stages of its development. “Bahrain would like to seize the opportunity to become the region’s fintech springboard,” he said. “We want to be the place where any fintech company can start and expand in the region and internationally.

“Our playing field is very much open. We want to offer a gateway to the region. If you want to experiment, this is the place to be because there is an alignment between the private and public sectors.”

Progressive regulators

Saad pointed out that currently, less than 1% of fintech originates from the Middle East. “There is a long way to go, but we are very progressive regulators,” he said. “We want to share and exchange knowledge. If we work together, we will grow. We have a unique value proposition in Bahrain.”

He said it takes years to develop a talent pipeline, but “in the meantime, there is a collaborative attitude”. He added: “We want to be competing at the higher end of the value chain – think along the lines of data, cloud and product design. These skills are important. Data is the new oil.”

Saad is aware that Bahrain’s fintech industry will demand a steady supply of coding talent for it to thrive and grow. “It’s about upskilling the existing talent,” he said. “We can’t just bring in new talent, as academia will never keep pace. This doesn’t happen overnight.”

Essam Hamad, acting executive director of customer engagement at government startup incubator Tamkeen, said there is an urgent need for Bahrain to fill its coding skills gap. “There is a visible gap in hard technical skills – we don’t have enough coders,” he said. “We would like to see more emphasis on data science in schools and vocational training.

“There are a lot of talented young Bahrainis, and we can exploit that by training them up in fintech. For many decades, finance has been our strong point. Over 60% of the country already works in the finance industry.”

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