Yasmin Al Sharaf from the Central Bank of Bahrain said Bahrain hosts many of the most innovative fintech activities, including broader access to financial services.
FinTech innovation is driving not only financial development but also financial inclusion across the GCC.
Bahrain, which has the oldest and most established financial services sector in the region, is leading the way in this push, especially as the country’s financial services sector recently overtook oil and gas to become the largest contributor to the economy. has played a role.
Financial inclusion not only empowers individuals, but also has a positive impact on economic development, as more people are able to save, access credit, and invest in productive activities, such as setting up small and medium-sized enterprises (SMEs). effect.
This has enabled GCC countries to transition from a financial sector dominated by large traditional banks to a sector driven by start-ups and financial innovators offering affordable and accessible services.
In the coming years, Bahrain and other GCC countries will continue to democratize the financial services sector, including by offering a range of value-added services to help individuals and small businesses make better-informed financial decisions. will do.
Current state of financial inclusion
The World Bank defines financial inclusion as “the process by which individuals and businesses have access to convenient and affordable financial products and services that meet their trading, payment, savings, credit, and insurance needs.” [and are] Provided in a responsible and sustainable manner. ”
Access to financial services in the GCC varies by demographic group. Significant gender disparities still exist, with women making around one-third as many credit card holders as men, and young people and low-income workers less likely to use financial services.
Migrant workers in particular face many access barriers. She may not have the ID, credit history, salary level, or local language skills needed to access basic financial services. As a result, many people end up using expensive physical exchanges, hurting their money transfers.
Fintech in the GCC
In recent years, fintech activity has increased in the region, particularly in the GCC countries.
From 2018 to 2022, the number of fintech hubs in the GCC will increase from just one to four, including Abu Dhabi Global Market, Bahrain Fintech Bay, Saudi Fintech, and Dubai International Financial Center Fintech Hive Did.
Fintech startups disrupt the traditional, rigid financial system and open banking and financial services to all segments of the population.
In Bahrain, bank account penetration is approaching 100% (compared to the global average of 76%), thanks in part to fintech innovations.
Ila Digital Bank promotes financial inclusion with a wide range of products tailored to the different needs and preferences of its customers. For example, you can open an account in minutes by simply scanning your national ID card, taking a selfie, and answering a few questions. .
Also in Bahrain, digital lending platform Flooss has adopted Tarabut’s Income Verification product to facilitate access to credit. This eliminates the need to manually submit payroll certificates.
Digital banking for everyone
These innovations remove many barriers to access for low-income workers, including migrant workers, on which industries such as construction in GCC countries rely. In fact, some fintech companies are targeting this very demographic with products and services.
Dubai-based fintech company Now Money offers services developed for low-income workers, such as migrant women in domestic work. The company’s customers have access to a suite of products that include affordable money transfer options, Visa cards, expense management, and fraud prevention educational resources.
Meanwhile, BFC Payments recently launched BFC Pay, a new payment solution targeted at the unbanked and underbanked in Bahrain. BFC Pay streamlines payments to people without access to traditional financial services and enables employers to pay workers directly and securely.
Technology supporting financial inclusion
Around the world, governments and regulators are playing an increasing role in fostering fintech innovation.
This is especially true across the GCC, where many efforts are already bearing fruit. Government-backed incubators and accelerators have proliferated over the past decade, along with regulatory sandboxes and financial free zones. For example, the Central Bank of Bahrain created the region’s first fintech regulatory sandbox, which spawned startups.
Meanwhile, the GCC’s central banks have established the GCC Real-time Gross Settlement System, an innovative cross-border payments scheme that enables smooth remittances between the six countries.
These government plans recognize the importance of fintech to achieving financial inclusion and often have a clear focus on working towards this goal.
With a population of 90 per cent foreigners, most of them on low incomes, the UAE has played a leading role in expanding access to financial services through technology-driven initiatives. For example, the UAE Central Bank recently launched a financial infrastructure transformation program that includes the issuance of a central bank digital currency, designed to foster financial inclusion.
The future of financial inclusion
The GCC is home to much of the most exciting fintech activity, so it is important to ensure this activity continues to expand access to financial services.
Fintech startups must work together with governments, regulators, communities, and other stakeholders towards this common goal. By doing so, we can bring to market customized products and services that meet the needs of the unbanked and unbanked groups.