The launch of a regulatory sandbox is on the Qatari authorities’ to-do list as they look to boost fintech investment and promote the Gulf state to international fintech innovators.
The creation of a sandbox is among the measures cited in a new report from the Qatar FinTech Hub (QFTH), which was established in May 2018 by the government-owned Qatar Development Bank (QDB) with the support of Qatar Central Bank (QCB).
As well as a sandbox – a testbed to allow start-ups and other new fintech-based initiatives to conduct ‘live’ experiments under regulatory supervision – the QFTH’s document proposes that the state could launch a ‘fintech innovation division’ and inter-university fintech body to develop talent and boost awareness of the sector.
The publication of ‘From Qatar to the world: A report on the state of fintech in Qatar’ follows the central bank’s launch of a national fintech strategy in December 2019. The strategy aims to facilitate the establishment and growth of local fintech companies, as well as enticing international businesses to make the state a launchpad for regional and global expansion.
Qatar has identified four areas of focus to promote fintech growth – payment technology, RegTech, Islamic Finance and small- and medium-sized enterprises (SMEs) – according to the document.
Fintech: ‘key tool’ for Qatar’s development
Sandboxes are becoming increasingly popular worldwide as financial authorities look to encourage innovation and competition in financial services. Gulf states with sandboxes already in operation include the United Arab Emirates (UAE) and Oman, as chronicled by the second edition of the ‘Arab Region Fintech Guide’, by the Arab Monetary Fund (AMF) a couple of months ago.
Writing in the foreword to the 60-page QFTH document, central bank governor HE Sheikh Abdulla Bin Saud Al-Thani states thatfintech is a ‘key tool to achieve long-term development prospects for the financial sector’ as part of Qatar’ Second Strategic Plan for the Financial Sector. This was launched in December 2017 and will run until next year.
The sandbox, which would ‘pave the way for a new era of financial services’ in Qatar is ‘in the process’ of being established, the governor states in the foreword.
QFTH already runs fintech incubation (for early-stage fintechs) and acceleration programmes (for more established companies). The third cohort launches tomorrow (12 October) under the theme ‘Embedded Finance and TechFin’. Selected candidate companies in the accelerator programme could receive up to $100,000 (about £73,800) in funding (up to $40,000 funding for those in the incubator programme), as well as $250,000-worth of ‘in-kind’ support.
More than 40 fintechs have ‘graduated’ through the programmes’ first two waves. The first cohort focused on payment technologies, while the second focused on emerging tech that address challenges faced by financial institutions.
Possibilities for government services
Qatar’s government has also facilitated access to capital through several venture vehicles, with QFTH itself having emerged as a leading fintech venture investor in the Middle East and North Africa (MENA) region.
“Qatar has been working hard to gain traction with globally trending technological developments and is shaping up as a technology-led economy,” QDB chief executive Abdulaziz Bin Nasser Al Khalifa states in a press release accompanying the report’s release.
“Fintech offers a significant opportunity to drive Qatar’s economic diversification, one of the four pillars of Qatar’s National Vision 2030. It also provides a massive opportunity for SMEs in GCC [Gulf Cooperation Council] countries, particularly in Qatar, to gain greater access to funding, one of the major challenges they face globally,” he added.
“Emerging technologies could play a significant role in the country’s overall economic transformation, especially where digitisation of services is involved, including government to citizen, business to consumer, government to business and business to business services.”
Other fintech initiatives in the country, which has a population of just under three million, include the launch of the Qatar Financial Centre’s ‘Fintech Circle’ co-working space in capital Doha.
Economic diversification push
QFTH was launched, and is run in collaboration with, the professional services firm EY. Executives from the latter joined representatives of the QDB for a photocall to launch the report.
The QDB, previously known as Qatar Industrial Development Bank, was created in 1997 with the objective of diversifying the economy, which continues to rely heavily on natural gas exports. The state is gearing up to host football’s World Cup, which will take place in November and December 2022.
Fintech is largely at an early stage of development across the Middle East, but is an attractive destination for fintechs due to the region’s relatively large unbanked or underbanked young population, high cash usage and recent regulatory developments that encourage growth, the QFTH report notes. It adds that fintechs in the region are focusing on remittances and insurance, while investment advisory and online trading are ‘gaining traction’.
QFTH has partnerships with other similar organisations including the UK’s Innovate Finance, Findec (Sweden), Singapore FinTech Association, Mumbai FinTech Hub, Istanbul FinTech Hub, Beirut Digital District, the Fintech Association of Nigeria, FinTech Hub Lithuania and FinTech Association of Malaysia.
‘Arab Monetary Fund highlights regional fintech progress’ – our news story (6 Aug 2021) on the publication of the second edition of the ‘Arab Region Fintech Guide’: this charts developments in areas ranging from open banking to cyber-security across 10 countries
‘Qatar fintech scheme opens for next applications’ – our news story (15 Dec 2020) on the QFTH opening the application process for its second cohort of fintechs
‘Qatar launches fintech accelerator programme’ – our news story (19 Oct 2020) on the QFTH announcing the fintech companies that had joined the first cohort of its ‘incubator’ and ‘accelerator’ programmes