As the GCC looks to ensure that it has a financial sector that can innovate while also preserving the overall stability of the financial system there are many factors that play an important role – and the future of the industry will be determined by how they innovate to overcome the challenges.
We have a single regulator for financial services – the Central Bank of Bahrain – and the same regulations apply across Bahrain, with no regulatory free zones. This approach has ensured consistent regulation and a holistic approach that has been able to manage risk across the financial sector. It also gives businesses the freedom to locate anywhere in Bahrain, helping to reduce operating costs.
Rising costs in recent years – for example, in terms of enhanced global regulatory requirements following the 2008 financial crisis – have put increasing pressures on margins.
At the same time, customers’ expectations are changing, with increasing demand for services and goods to be provided through digital channels. And in the Gulf, which has some of the highest levels of smartphone penetration rates in the world, this challenge is particularly pressing.
So it is no surprise that these institutions are looking to the new potential embodied in recent technological development to drive the innovation they need to reduce costs, create new innovative products and services and connect with consumers in the way that suits them.
For Bahrain, this makes for an exciting time. Financial services accounts for around 17% of GDP and more than 14,000 jobs – we know that we need to enable innovation if we want Bahrain to remain a regional financial centre and we are excited by the potential that new approaches could unlock.
This is why we have put such an emphasis on creating an ecosystem that can enable that innovation. This has involved a number of different aspects – from regulation to funding, and from training to international partnerships.
Of course, innovation is not something that happens just once – and last year has seen a number of developments, particularly around FinTech.
To give you a sense of some of the elements we have already put in place, we have:
- Launched a regulatory sandbox to allow firms to innovate in a controlled manner
- Created a national e-wallet
- Launched the largest FinTech hub in the Middle East – Bahrain FinTech Bay
- Signed partnerships with a range of other FinTech hubs to share knowledge and expertise –from local centres like ADGM to international partners like Singapore Fintech Consortium
- Launched the first regulations in the region enabling onshore cowdfunding in conventional and Islamic finance
And we are far from done. We see this very much as the start of something, not the end. If there are areas where you think things need to change in order to enable innovation, or if there are opportunities you think are being missed, then we would really like to hear from you and see where Bahrain can help remove obstacles and unlock opportunity.
