Arab state authorities’ growing investment in fintech-related infrastructure has been highlighted in a publication examining advances in legal and regulatory frameworks.
The second edition of the ‘Arab Region Fintech Guide’, newly published by the Arab Monetary Fund (AMF), charts developments in areas ranging from regulatory sandboxes and open banking to cyber-security across 10 countries.
Jordan, Sudan, Iraq, Oman, Kuwait and Lebanon are new entries to the publication, which includes updates from four countries included in its first edition – the United Arab Emirates (UAE), Bahrain, Saudi Arabia and Egypt – published in August last year.
Over 107 pages the guide sets out information and updates in areas such as regulatory and supervisory provisions and procedures, as well as licensing requirements for companies, all illustrative of mounting interest in fintech.
‘Collecting information about fintech initiatives, regulations and activities in the Arab region on a central portal is becoming crucial in order to enhance the ecosystem as most information is either scattered or not easily accessible,’ the authors state in its introduction.
UAE in pole position
Publication of the guide’s second edition comes three months after the AMF unveiled an index ranking Arab countries’ fintech development. The UAE ranked first in the ‘FinxAr’ index, with Saudi Arabia second and Bahrain third.
The newly published guide notes that the UAE, where the AMF has its headquarters, was the first country in the Middle East to ‘lay the groundwork’ for a fintech ecosystem. The country hosts two regulatory sandboxes, as well as ‘co-sandboxes’ run by the Central Bank of the UAE (CBUAE), Abu Dhabi Global Market (ADGM) and the Dubai Financial Services Authority (DFSA).
Recent developments flagged in the guide include: the central bank’s launch of a ‘Fintech Office’ in November 2020; CBUAE and the banking sector having jointly implemented a distributed ledger technology (DLT) trade finance platform (the first phase was launched in early 2021); and the DFSA’s launch of a chatbot that uses artificial intelligence to respond to public queries.
The DFSA has also tested a compliance tool that uses AI to review large documents (such as a prospectus for an issue of securities) and to identify missing information, while the central bank and UAE Banking Federation have implemented a cyber-threat intelligence platform to allow banks to share information. The CBUAE is keen to explore connectivity with similar platforms in the GCC countries.
Government office Smart Dubai and IBM have teamed up to provide Dubai Blockchain Platform, a government-endorsed blockchain platform-as-a-service.
Fintech-friendly initiatives across region
In respect of Saudi Arabia, the guide notes that a ‘National Fintech Strategy’ containing 25 workstreams is in the final stage of government approval and mobilisation.
Bahrain, meanwhile, is described as the first country in the region to mandate that all retail banks comply with open banking regulations.
Oman, a new entry to the guide, is driving numerous fintech-friendly initiatives. The Central Bank of Oman (CBO), for example, is on drafting an open banking API (application programming interface) strategy and launched a fintech regulatory sandbox in December 2020.
Other steps taken by the central bank during the past couple of years include simplifying know-your-customer (KYC) policy and constituting a fintech committee, while the CBO is also planning to work on a fintech regulatory framework.
Other central bank-led activity mentioned in the guide include Egypt’s authority setting aside floorspace for the establishment of a ‘Fintech Hub’.
The guide is based on information provided by central banks and monetary authorities, and was produced in co-operation with members of the Arab Regional Fintech Working Group. The AMF’s director-general and chairman of the board of directors, His Excellency Dr Abdulrahman Al Hamidy, wants the guide’s third edition to include all Arab countries. The AMF itself has 22 members.
Buna’s ‘strategic milestone’
Separately, the AMF convened a virtual workshop on 29 July to discuss instant payment implementation at a regional and global level.
The event marked the launch of instant payment settlement services from Buna, the AMF-owned cross-border multi-currency payment system.
Speakers included representatives from the European Central Bank (ECB), Bank of Italy (Banca d’Italia), Belgium-headquartered interbank payments network SWIFT and the Jordan Payments & Clearing Company (JoPACC), as well as commercial banks.
“Launching instant payment settlement services represents another strategic milestone in Buna’s roadmap and reflects our vision to cover the future needs of the banking sector,” said Buna’s chief executive, Mehdi Manaa.
‘Arab Monetary Fund launches regional fintech development index’ – our news story (5 May 2021) on the ‘FinxAr’ index
‘Saudi Arabia to launch open banking in 2022’ – our news story (18 January 2021) on Saudi Arabia’s central bank issuing a roadmap for open banking’s roll-out
‘Arab central banks: governments must ‘open up’ to open banking’ – our news story (1 Dec 2020) on an AMF ‘A Vision of Open Banking in the Arab World’ publication