CAIRO: In the Arab world, there is plenty of room for growth of the proportion of the adult population with access to banking services, according to a World Bank study.
Globally, as many as 69 percent of adults have an account at a bank or mobile money provider, says the report.
Up to 20 million adults in the Middle East and North Africa send or receive domestic remittances but do not have a bank account.
In fact, countries with the highest gross domestic product per capita have significant levels of underutilization of banking facilities, such as those in the Gulf Cooperation Council (GCC).
This is mainly due to the large expatriate population working in these countries with low and middle-income salaries.
In the UAE in particular, about 80 percent of the population is outside the current financial system due to a lack of suitable bank accounts, insurance policies, credit cards and loan options.
While many of the region’s banks have begun to evolve from conventional ones into wider financial services providers, there is still much work to be done in terms of financial inclusivity.
In a clear nod to the fact that regional financial inclusion has direct bearing on the socioeconomic development of its citizens, the Council of Arab Central Banks officially declared April 27 the Arab Day of Financial Inclusion in 2018.
Ian Dillon, pictured, cofounder of Now Money — a Dubai-based financial technology (fintech) group — said while 70 percent of the UAE population does not earn enough to meet the minimum salary level required to open a traditional bank account, most do make monthly remittances overseas.
Founded four years ago, Now Money launched with the aim of opening up financial services for low-income workers in the Gulf, such as laborers, taxi drivers, cleaners and hotel staff.
“The UAE remittance market is over $30 billion annually, the third largest in the world. Importantly, 98 percent of this population own a smartphone, being their only lifeline to family back home,” Dillon said.
Utilizing a smartphone app, Now Money offers access to competitive exchange rates. It also provides access to the broader financial system via a debit card for store and online purchases — such as mobile phone top-ups — as well as cash machines. The firm has agreements with 20 companies to provide services to their employees.
“Traditional banks make money through deposits and lending, which is why they avoid low-income customers,” said Dillon.
“They tend to withdraw funds in cash as soon as they’re paid, and don’t have the ability to take large lending products,” he added.
“Knowing there was a captive, tech-savvy market with a reliable remittance behavior pattern gave us the idea for Now Money, an app-based account and remittance marketplace for the up to 5 million low-income migrant workers in the UAE and 25 million across the GCC countries.”
Dillon said the biggest challenge for anyone wanting to do something new in payments, particularly in an emerging market, is a lack of understanding. “We’ve had to blaze our own trail; there has been no path to follow,” he added.
Dillon said the Middle East is beginning to embrace startup culture to make it easier for others to follow, which is a positive first step.
“We’re really happy to have been a part of the process that enables the UAE economy to grow with new businesses, innovations and technologies,” he added.
“Expansion across the Gulf excites us … There’s so much opportunity, especially in Saudi Arabia and Bahrain,” he said.
“The product may differ a little for each market depending on requirement and appetite, but we’re already establishing partnerships in these markets to allow us to launch in early 2020.”
• This report is being published by Arab News as a partner of the Middle East Exchange, which was launched by the Mohammed bin Rashid Al Maktoum Global Initiatives and the Bill and Melinda Gates Foundation to reflect the vision of the UAE prime minister and ruler of Dubai to explore the possibility of changing the status of the Arab region.