{ "title": "Unleashing Mideast Fintech", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2023/09/unleashing-mideast-fintech-amjad-ahmad", "canonical": "https://www.imf.org/en/publications/fandd/issues/2023/09/unleashing-mideast-fintech-amjad-ahmad", "overlayPath": "/en/publications/fandd/issues/2023/09/unleashing-mideast-fintech-amjad-ahmad/index.md", "summary": "A better regulatory environment will bring the Middle East more investment and innovation in digital finance", "sections": [ { "heading": "Overview", "content": "- A better regulatory environment will bring the Middle East more investment and innovation in digital finance.\n- Author: AMJAD AHMAD, chairman of the empowerME initiative at the Atlantic Council and managing partner, MENA, and emerging markets advisor at 500 Global.\n- Publication: F&D Magazine, September 2023.\n- Core thesis: The Middle East and North Africa (MENA) region has strong demographic and digital-penetration fundamentals that position it for fintech-driven financial inclusion and economic diversification, but realizing this potential requires substantial regulatory and ecosystem reforms." }, { "heading": "Market potential and demographics", "content": "- A third of the population is under 30, creating demand for products and services for new households and job creation.\n- High mobile, internet, and smartphone penetration rates create fertile ground for digital financial products.\n- Noncash payments in the United Arab Emirates rose from 39 percent in 2018 to 73 percent in 2023.\n- Current digital banking usage: only 17 percent of consumers in the Middle East use digital banking compared with almost 60 percent in the United States." }, { "heading": "Current adoption, fintech size, and projections", "content": "- Fintech revenues in the Middle East, North Africa, and Pakistan region expected to increase from $1.5 billion in 2022 to $3.5–$4.5 billion by 2025.\n- Fintech in the banking sector projected to grow from less than 1 percent to 2–2.5 percent.\n- Comparable benchmarks cited: Brazil’s 5–7 percent and Nigeria’s 12–15 percent fintech penetration in banking.\n- Venture funding metrics:\n - Fintech venture funding in MENA rose to $925 million in 2022 from $587 million in 2021, an increase of 58 percent.\n - Funding in 2022 was across 131 deals compared with 124 deals in 2021.\n - The sector’s share of venture funding increased from 21 percent in 2021 to 29 percent in 2022.\n - As of Q1 2023, deals and funding in the region recorded the lowest values since the start of the COVID pandemic.\n - Venture capital financing in the MENA region declined 13 percent in 2023; the number of deals dropped by 55 percent." }, { "heading": "Structural obstacles and market dynamics", "content": "- Banking sector is often \"sacred ground\": banks owned primarily by government, quasi-government institutions, or well-connected elites; protective regulations favor incumbents and entrench national champions.\n- Many fintech start-ups operate as service providers or customer-acquisition tools for incumbent banks rather than competitors.\n- Fragmented regional regulatory and market structure inhibits scalability; pan-regional fintech players have yet to emerge in substantial numbers.\n- Market scalability is costly and regulations are prohibitive; founders report difficulty meeting growth targets and building sustainable, profitable models without regional, multimarket approaches.\n- Governments tend to pursue a top-down, government-led approach to fintech hubs (Abu Dhabi, Bahrain, Dubai, Riyadh), which can deter industry-led innovation." }, { "heading": "Investment patterns and sectoral focus", "content": "- Payment start-ups dominated initial investment waves due to remittances and trading activity.\n- Diversification in funded start-ups includes buy-now-pay-later (Tabby, Tamara), open banking (Lean Technologies, Tarabut Gateway), SME lending (Lendo, Liwwa), and wealth management (Sarwa, Thndr).\n- Increase in average funding round size noted in 2022 relative to 2021." }, { "heading": "Policy actions and recommendations", "content": "- Level the playing field:\n - Allow incumbents, international players, and start-ups to compete fairly to drive IT spending, innovation, and improved products and services.\n - Increased competition should facilitate intracountry and intercountry mergers and acquisitions and enable venture-capital exit opportunities.\n- Regulatory harmonization:\n - Increase regulatory transparency and public engagement.\n - Allow licensed players in one country to operate freely in another where feasible.\n - Encourage agreements between regulators in regional hubs to reduce geographic expansion friction.\n- Democratize access to information:\n - Implement open banking regulations and comprehensive credit registries to lower costs and foster competition.\n- Expand investor base:\n - Grow local venture capital and limited partner pools beyond sovereign wealth funds and quasi-government entities.\n - Attract institutional investors such as pension funds, endowments, foundations, insurance companies, and asset managers via guarantee and incentive programs.\n- Human capital and immigration policy:\n - Reform education to align talent with knowledge industries.\n - Improve current workforce skills via public-private partnerships, targeted programs, and private-sector incentives.\n - Launch long-term permanent visa programs and a path to citizenship, especially for talented expatriate professionals.\n- Regulatory capacity building:\n - Develop expertise and resources to regulate fintech effectively.\n - Allow early-stage fintech companies room to build before imposing overly restrictive regulation to unleash innovation." }, { "heading": "Conclusion", "content": "- Fintech can materially improve financial inclusion, economic growth, consumer welfare, and cross-border investment and trade in the MENA region.\n- Governments must implement the outlined reforms to ignite sustainable, scalable fintech innovation that leverages demographic and technology advantages.\n\nSource: \"Unleashing Mideast Fintech,\" Amjad Ahmad, F&D Magazine, September 2023.\n\n---\n\n Content in this bundle\n\n- Unleashing Mideast Fintech\n - Unleashing Mideast Fintech (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Unleashing Mideast Fintech (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2023/09/unleashing-mideast-fintech-amjad-ahmad" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2023/09/unleashing-mideast-fintech-amjad-ahmad/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2023/09/unleashing-mideast-fintech-amjad-ahmad/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2023/09/unleashing-mideast-fintech-amjad-ahmad/bundle-manifest.json)", "Authors: Amjad Ahmad", "Published: September 1, 2023", "A better regulatory environment will bring the Middle East more investment and innovation in digital finance.", "Author: AMJAD AHMAD, chairman of the empowerME initiative at the Atlantic Council and managing partner, MENA, and emerging markets advisor at 500 Global.", "Publication: F&D Magazine, September 2023.", "Core thesis: The Middle East and North Africa (MENA) region has strong demographic and digital-penetration fundamentals that position it for fintech-driven financial inclusion and economic diversification, but realizing this potential requires substantial regulatory and ecosystem reforms.", "A third of the population is under 30, creating demand for products and services for new households and job creation.", "High mobile, internet, and smartphone penetration rates create fertile ground for digital financial products.", "Noncash payments in the United Arab Emirates rose from 39 percent in 2018 to 73 percent in 2023.", "Current digital banking usage: only 17 percent of consumers in the Middle East use digital banking compared with almost 60 percent in the United States.", "Fintech revenues in the Middle East, North Africa, and Pakistan region expected to increase from $1.5 billion in 2022 to $3.5–$4.5 billion by 2025.", "Fintech in the banking sector projected to grow from less than 1 percent to 2–2.5 percent.", "Comparable benchmarks cited: Brazil’s 5–7 percent and Nigeria’s 12–15 percent fintech penetration in banking.", "Venture funding metrics:", "Banking sector is often \"sacred ground\": banks owned primarily by government, quasi-government institutions, or well-connected elites; protective regulations favor incumbents and entrench national champions.", "Many fintech start-ups operate as service providers or customer-acquisition tools for incumbent banks rather than competitors.", "Fragmented regional regulatory and market structure inhibits scalability; pan-regional fintech players have yet to emerge in substantial numbers.", "Market scalability is costly and regulations are prohibitive; founders report difficulty meeting growth targets and building sustainable, profitable models without regional, multimarket approaches.", "Governments tend to pursue a top-down, government-led approach to fintech hubs (Abu Dhabi, Bahrain, Dubai, Riyadh), which can deter industry-led innovation.", "Payment start-ups dominated initial investment waves due to remittances and trading activity.", "Diversification in funded start-ups includes buy-now-pay-later (Tabby, Tamara), open banking (Lean Technologies, Tarabut Gateway), SME lending (Lendo, Liwwa), and wealth management (Sarwa, Thndr).", "Increase in average funding round size noted in 2022 relative to 2021.", "Level the playing field:", "Regulatory harmonization:", "Democratize access to information:", "Expand investor base:", "Human capital and immigration policy:", "Regulatory capacity building:", "Fintech can materially improve financial inclusion, economic growth, consumer welfare, and cross-border investment and trade in the MENA region.", "Governments must implement the outlined reforms to ignite sustainable, scalable fintech innovation that leverages demographic and technology advantages.", "**Unleashing Mideast Fintech**" ], "related": [ { "title": "Unleashing Mideast Fintech", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2023/september/ahmad-amjad.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2023/september/ahmad-amjad.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2023/september/ahmad-amjad.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/fandd/issues/2023/09/unleashing-mideast-fintech-amjad-ahmad/index.md", "json": "/en/publications/fandd/issues/2023/09/unleashing-mideast-fintech-amjad-ahmad/index.json", "bundleManifest": "/en/publications/fandd/issues/2023/09/unleashing-mideast-fintech-amjad-ahmad/bundle-manifest.json" }, "generatedAtUtc": "2026-09-15T18:50:06.470Z" }