Gulf financial centers battle it out to be the region’s fintech hub

Dubai's DIFC launched its "FintechHive initiative in early 2017. (Shutterstock)
Updated 08 May 2018

Gulf financial centers battle it out to be the region’s fintech hub

  • Dubai, Abu Dhabi, Bahrain and Saudi Arabia have all launched a series of fintech initiatives
  • “Saudi Arabia is in a unique position where it can learn from global successes and achieve tangible results more efficiently and effectively.”

LONDON: Gulf countries are vying to become the regional hub for fintech start-ups and entrepreneurs and are pouring money into educational campaigns; schemes to develop talent and trendy co-working spaces.

The region is racing to catch up with the global tech hubs of London and Silicon Valley, as well as individual countries competing with their neighbors to be the most attractive destination for Fintech firms.

In Dubai — typically seen as one of the region’s pioneers in fintech — the Dubai International Financial Center (DIFC) is set to accept applications from startup tech firms this month for the second round of ‘FintechHive,’ a 12-week talent mentorship program originally set up last year.

This year the scheme is expanding its focus into Islamic finance and insurance.

“We always want to make sure that we are looking to stay ahead of the trends and understand what the region needs so that we can provide an adequate framework to enable innovation to flourish,” said Amr ElSaadani, managing director and financial services lead for Accenture in the Middle East and Turkey.

The US-based consultancy firm signed an agreement on May 5 with the DIFC to continue to back the DubaiHive program.

Saudi Arabia has also ramped up efforts to secure a slice of the the fintech market with the launch of ‘FintechSaudi’ initiative last month. Bahrain launched its Bahrain Fintech Bay in February, a new co-working space that brings together startups, banks and other companies into one space.

Both Saudi Arabia and Bahrain set up their own regulatory ‘sandboxes’ earlier this year, a concept which allows start-ups and companies to test out banking ideas and solutions in a ‘safe’ live environment without dealing with the burden of too much regulation.

While barely a week goes by without a new launch, conference or seminar on the latest fintech innovations, experts warn there is still a lot of work to be done to help attract and keep firms working in the region.

Rushdi Duqah, partner, consulting and operations at Deloitte, based in Riyadh, told Arab News that there was a need for Gulf countries to work more closely together, particularly on regulation.

“The region is demonstrating strong commitment for fintech. It is seen as a strategic priority with each country has its own strategic positioning,” he said.

“What I would like to see is how the different fintech hubs would collaborate with each other in the region, because there is more to do on that front than just being seen as competing (with each other),” he said.

“Fintechs that emerge in one country would want to come and scale, operate and test in another country, and that collaboration would be something that would benefit both Fintechs and the countries in which they operate. Rather than companies having to reinvent the wheel every time they need to go to another country,” he said.

Fintech firms told Arab News that regulation and access to financing were obstacles to growth.

Craig Buchan, founder and CEO of Qpal, a mobile payment app company based in Dubai, said: “Early stage financing would be desirable. Challenges relate mainly to regulation, Know-Your-Customers (KYC) and access to finance.

“The UAE government has great initiatives in place to transform Dubai into a global fintech hub, but until banks revise their risk propensity then early stage fintech’s may find it hard to get off the ground and make significant traction.”

Qpal is a startup supported by In5, the Dubai-based tech incubator platform owned by the Tecom Group.

Artemisa Jaramillio, professor of digital marketing, technology & innovation at the Princess Nourah Bint Adbulhahman University, said that those working in the fintech industry in Saudi Arabia must have a clear focus.

“Urged by the NTP 2020, stakeholders have started to create a number of events, without a clear goal in mind. What are our success metrics? Are we only creating events to tick the box,” she told Arab News.

“Are these real, scalable solutions or are we only following the trend of inflating our numbers,” she said.

Adrian Quinton, head of financial services at KPMG in Saudi Arabia, said the fact that Saudi Arabia has lagged behind its peers could play to the Kingdom’s advantage as it strives to be a fintech hub.

“Saudi Arabia is in a unique position where it can learn from global successes and achieve tangible results more efficiently and effectively,” he said.


Easy credit poses tough challenge for Russian economy minister

Updated 18 August 2019

Easy credit poses tough challenge for Russian economy minister

  • Measures being prepared to help indebted citizens; situation might blow up in 2021

MOSCOW: New machines popping up in Russian shopping centers seem innocuous enough — users insert their passport and receive a small loan in a matter of minutes.

But the devices, which dispense credit in Saint Petersburg malls at a sky-high annual rate of 365 percent, are another sign of a credit boom that has authorities worried.

Russians, who have seen their purchasing power decline in recent years, are borrowing more and more to buy goods or simply to make ends meet.

The level of loans has grown so much in the last 18 months that the economy minister warned it could contribute to another recession.

But it’s a sensitive topic. Limiting credit would deprive households of financing that is sometimes vital, and could hobble already stagnant growth.

The Russian economy was badly hit in 2014 by falling oil prices and Western sanctions over Moscow’s role in Ukraine, and it has yet to fully recover.

“Tightening lending conditions could immediately damage growth,” Natalia Orlova, chief economist at Alfa Bank, told AFP.

“Continuing retail loan growth is currently the main supporting factor,” she noted.

But “the situation could blow up in 2021,” Economy Minister Maxim Oreshkin warned in a recent interview with the Ekho Moskvy radio station.

He said measures were being prepared to help indebted Russians.

According to Oreshkin, consumer credit’s share of household debt increased by 25 percent last year and now represents 1.8 trillion rubles, around $27.5 billion.

For a third of indebted households, he said, credit reimbursement eats up 60 percent of their monthly income, pushing many to take out new loans to repay old ones.

Orlova said other countries in the region, for example in Eastern Europe, had even higher levels of overall consumer debt as a percentage of national output or GDP.

But Russian debt is “not spread equally, it is mainly held by lower income classes,” which are less likely to repay, she said.

The situation has led to friction between the government and the central bank, with ministers like Oreshkin criticizing it for not doing enough to restrict loans.

Meanwhile, economic growth slowed sharply early this year following recoveries in 2017 and 2018, with an increase of just 0.7 percent in the first half of 2019 from the same period a year earlier.

That was far from the 4.0 percent annual target set by President Vladimir Putin — a difficult objective while the country is subject to Western sanctions.

With 19 million people living below the poverty line, Russia is in dire need of development.

“The problem is that people don’t have money,” Andrei Kolesnikov of the Carnegie Center in Moscow wrote recently.

“This is why we can physically feel the trepidation of the financial and economic authorities,” he added. Kolesnikov described the government’s economic policy as something that “essentially boils down to collecting additional cash from the population and spending it on goals indicated by the state.”

At the beginning of his fourth presidential term in 2018, Putin unveiled ambitious “national projects.”

The cost of those projects — which fall into 12 categories that range from health to infrastructure — is estimated at $400 billion by 2024, of which $115 billion is to come from private investment.