FinTech is booming in the Arab region. Venture capital is pouring into the sector and key financial centres are buzzing with talk of disruptive new start-ups reshaping the region’s financial scene. Established banks and innovative start-ups alike have recognised FinTech’s huge growth potential as a sector, embracing its ability to provide digital solutions for millions of tech-savvy users in the Middle East and North Africa.
Several Gulf Cooperation Council (GCC) countries have adopted national FinTech strategies in the drive for “post-oil” economies. But one country is leading the way for financial innovation: Bahrain.
Its regulatory innovation, government programs, and a highly skilled workforce have made it one of the region’s most dynamic FinTech environments, where global players including Amazon Web Services and Binance have already set up operations.
A hub with history
The kingdom has long been established as a financial services hub in the GCC, with its capital Manama home to the region’s oldest established banking and financial services sector, which accounts for around 19% of GDP and exceeding oil during Q4 of 2022.
In recent years, Bahrain has put technological innovation at the core of its financial offering as it transforms into a digital economy. At the heart of Manama’s financial scene is Bahrain FinTech Bay, the region’s largest Fintech hub, which was created in association with dozens of partners including banks, payment processors, and technology firms.
Bahrain FinTech Bay, a public-private partnership, has incubated more than 80 FinTechs and startups since 2018, the vast majority of which did not previously operate in Bahrain. The kingdom is now home to over 120 fintech startups, a figure which has doubled since 2018.
The youth factor
The kingdom also benefits from a young, digitally savvy working population which provides both a market and a workforce for FinTech innovations. Bahrain’s workforce, which is expected to double to 2 million by 2030, ranks first in the GCC for computer programming talents, based on a recent report, while over 60% of the ICT workforce in Bahrain is aged between 18 and 24.
Bahrain’s FinTech success is also a result of its flexible and forward-looking approach to regulation, including new policies on crowdfunding, crypto-assets, and the introduction of an open banking system. In 2017, the Central Bank of Bahrain established a regulatory sandbox — the first in the MENA region — to help tech disrupters trial new products and test experimental strategies. One early success was the Tarabut Gateway, the first graduate from Bahrain’s sandbox in 2018, which is now MENA’s largest open banking platform.
Amazon Web Services launched a cloud computing region in Bahrain in 2019 to provide cloud services to the wider MENA region as economies become more digitally focused. The kingdom’s flexible regulatory approach meant it could introduce the legislation required for AWS’s move within months.
Crypto and the Kingdom
The Kingdom is also taking steps to establish itself as a leading crypto-asset innovator and an early adopter in digital assets. Unlike most GCC countries, the Kingdom already has crypto-asset regulation in place, attracting crypto firms looking to set up in the region.
The world’s biggest cryptocurrency exchange, Binance, in March secured a licence to operate as a crypto asset service provider in Bahrain — the first of its kind in the GCC. It means Binance can now provide services including crypto-trading and portfolio management to people in the Kingdom. Rain, one of the Middle East’s biggest cryptocurrency platforms, is also Bahrain-based and licensed by its central bank.
Some barriers to entry remain for FinTech start-ups in the region, including access to funding and the lack of regulatory harmony between GCC countries. Nonetheless, Bahrain offers huge opportunities to startups, given its flexible, innovative approach to regulation and a young, digitally-minded population who can both use their products and work for them.
