Fintech in the Middle East and Africa: Regional Review

Updated: Mar 10, 2021

MENA is one of the world's most heterogeneous regions, spanning three continents and 21 countries, with a population of close to 600 million. It is a culturally, politically and economically diverse region that also encompasses the six Arab states that are members of the Gulf Coordination Council. This diversity is reflected in the vastly different stages of advancement of the FinTech industries and mobile banking solutions across the region.

Digital Banking in the Middle East and Africa

The GCC countries appear the readiest for FinTech adoption in the Middle East and Africa, "thanks to the preference of clients for digital banking, the ready availability of financial capital, and a push by regulators.”

The slower progress of the North and Sub-Saharan African Countries is attributed to the quality of their infrastructure, lack of capital, limited adoption, with a few exceptions, and weaker regulators. Those exceptions are no doubt South Africa, Nigeria and Kenya, where there has been significant innovation and the creation of ground-breaking mobile payment solutions like MPesa.

Fintech Overview 2020 MENA

The number of FinTechs per country across the Arab world also differs considerably. The UAE is the leader in FinTech innovation, comprising some 24% of the FinTechs in the region. Both Morocco and Egypt follow, with 12% and Tunisia with 10% of FinTechs.

In terms of the areas likely to most benefit from FinTech across the entire region, S&P Global pinpoints remittances, banking penetration, the security of transactions, and compliance.

The disparities within the region are also noticeable in terms of the venture and human capital availability to fund the growth of FinTechs, with more capital available in GCC compared with scarcity in African countries.

Internet penetration in GCC is streets ahead of North and sub-Saharan Africa as a whole. Finally, a far more significant proportion of the population has made or received digital payments in the GCC countries versus the MEA countries.

The entire MENA region is home to some of the world's most unbanked populations, particularly in Africa, but with the Arab states not far behind. Ultimately this will see the FinTech playing fields within the region begin to level out during the decade ahead, as long as the regulators keep the field open for them.

Regulations across the region are also at various stages of development as authorities grapple with how to balance the need to protect customers while allowing innovation to thrive and ultimately benefit customers by offering them lower fees and access to financial facilities they would otherwise not be able to use.

In Clifford Chance's Fintech in the Middle East – Developments across MENA, it noted that there had been a rapid change in the regulatory environment. The central banks of Egypt, Bahrain, UAE and Jordan have adopted specific initiatives to regulate digital payment services. Lebanon, the Dubai International Financial Centre (DIFC), Bahrain and Abu Dhabi Global Market (ADGM) have introduced crowdfunding regulations. Meanwhile, the UAE securities regulator allowed the licensing of ICOs. When it comes to Africa, the African Continental Free Trade Area Agreement (AFCFTA), which entered into force on 30 May 2019, is supposed to accelerate FinTech innovation on the continent. These are just some of the developments that have taken place over the last few years.

MENA Countries Overview

United Arab Emirates

The UAE is, without doubt, the furthest along on their FinTech journey and the most globally competitive country in MENA.

"By giving FinTechs in the UAE a holistic, dynamic ecosystem with an independent regulatory and English Common Law judicial system and global financial exchange, start-ups can be better equipped to promote their innovative solutions and expansion plans to investors." - Arif Amiri, the chief executive of Dubai International Financial Centre