Ambitious fintechs naturally gravitate towards hubs where they can benefit from network effects in areas such as investment, talent and idea generation. As a result of this, cities such as San Francisco, London and Shenzhen have fast become hotbeds for scaling fintech businesses that have gone on to become global household names.
The UAE is also one of the leading fintech hubs globally, and the UAE government and business community are making concerted and coordinated efforts to further strengthen the country’s position as an international hub for new and established fintechs alike.
Over the rest of this year and beyond, the UAE aims to cultivate further growth through a combination of substantial market opportunity, supportive government policies and a growing fintech ecosystem.
Commercial opportunities
The Middle East and north Africa (MENA) region is an attractive destination for fintechs due to the volume of commercial opportunities on offer. Unlike mature markets, such as the US and Europe, a substantial proportion of the region’s population are either underbanked or unbanked. Within the Middle East alone, 136 million adults fall into these categories.
For globally-minded fintechs, this provides access to significant commercial opportunities that can play an important role in expanding their customer base, while simultaneously supporting financial inclusion. This is reflected in the growth of specific fintech verticals across the region. Even before the pandemic accelerated their adoption, digital payments in the UAE were already rising at an annual rate of more than 9% between 2014 and 2019, compared with Europe’s average annual growth of 4% to 5%.
Furthermore, the demographic profile of the MENA region also provides substantial opportunities. Some 60% of Kuwait’s population, for example, is below the age of 30, and the median age in Egypt (with a population of 102 million) is just 24. At the same time, much of MENA’s population is extremely tech savvy and desire products that offer speed, reliability and convenience.
Government-backed entrepreneurship
The UAE government has launched a series of initiatives designed to nurture entrepreneurship, which will help fintechs capitalise on opportunities across the region.
The UAE government has launched a series of initiatives designed to nurture entrepreneurship, which will help fintechs capitalise on opportunities across the region
For example, the country has recently established several special economic zones with: business-friendly civil and commercial laws; zero tax on business income and profits; and no restrictions on foreign exchange or capital repatriation. These measures will help attract incumbent international players and thereby create strong potential network effects.
On top of this, the UAE has implemented golden visa schemes, which enable foreigners to live, work and study in the UAE without the need of a national sponsor and with 100% ownership of their business on the UAE’s mainland.
Access to funding
As any entrepreneur knows, funding is one of the most important ingredients in the success of any venture. According to Forbes Middle East, 22 of the 50 best funded start-ups in the MENA region in 2021 were based in the UAE. Of these, 13 were fintechs. Last year was also a record year for the region, with $1bn in start-up investments, which signals what continues to be an insatiable investor appetite in the tech sector.
This is a result of a concerted effort on the part of our government. Free zones have been at the heart of this, with innovative initiatives from Abu Dhabi Global Market and the Dubai International Financial Centre providing a range of benefits, including zero tax on business income and profits.
The Dubai government also announced the Dh1bn ($270m) Dubai Future District Fund to support seed-to-growth-stage tech start-ups, which was launched by Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, minister of finance of the UAE and deputy ruler of Dubai.
Similarly, the Abu Dhabi government has put in place several initiatives to create a favourable business environment for entrepreneurial talent and innovative businesses, such as Abu Dhabi Catalyst Partner’s $1bn fund, Abu Dhabi Investment Office’s $545m Innovation Programme and Hub71’s global tech ecosystem. The latter has helped start-ups raise more than $420m to date.
As the UAE’s digital economy continues to mature, and region-wide innovation and favourable regulations continue to attract top start-up talent, these businesses are replicating successful global models in the MENA region to form a global hub of fintech innovation, simultaneously benefiting the industry, the region and the people who live here.
This year, the UAE is expected to undergo a significant year in its adoption of digital payments, which are set to account for 73% of transaction volume by 2023. With a large population of spenders on the cusp of transitioning to digital payments, coupled with a government prioritising entrepreneurship and critical access to funding, the region is cementing its place on the global stage as a major fintech player.
Nameer Khan is chairman and founding board member of the MENA Fintech Association.
