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A global stage for local fintech

Bahrain, the emerging Singapore in Gulf, aims to propel Indian financial technology companies to the international stratosphere

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Bahrain is the new Singapore. It plans to handpick Indian start-ups in fintech space to give them a foothold in Bahrain, a perfect gateway to the entire Gulf region, and help them grow big across the globe.

“India is a big market. We will help Indian-origin fintech companies go global, especially in the Gulf region. We have just begun exploratory talks with many of them,” David Parker, executive director – financial services business development, Economic Development Board (EDB), told DNA Money.

For instance, Paytm, an Indian payment services provider run by Alibaba-backed One97, is looking to expand its operations in the Gulf, with a base in Bahrain.

EDB, which is mandated to diversify and broadbase the once oil-dependent Bahrain’s economy, wants to make the country ‘Singapore’ of the region. “We have identified five growth areas for Bahrain. These are financial services, manufacturing, tourism, logistics and ICT,” says Khalid Al Rumaihi, chief executive of EDB.

“In a short span of time, EDB has doubled the foreign direct investments into Bahrain while enhancing job generation, steadily. These are two obvious matrices to measure the impact of EDB,” said the chief executive, adding that he targets $500 million FDI to come through EDB by 2018.

The country, which is a part of the GCC Monetary Union, has its 80% of its GDP based on non-oil related sectors. However, a majority of the government’s finances still come from oil revenues. As the country began its diversification a couple of decades ago, the ongoing volatility in oil prices did not have any devastating impact on its economy, unlike other oil-dependent economies in the region. As of now, Bahrain is undergoing a spate of reforms and regulatory changes.

In 2015, Bahrain’s real GDP recorded a 3.6% growth, and it is likely to repeat the feat in 2016. The government, however, is facing a serious challenge of growing fiscal deficit, which touched 13.6% in 2015. Fitch Ratings expects the deficit to fall only moderately to 12.3% of GDP in 2017, assuming Brent averages $45 per barrel.

Bahrain has also drawn up a plan to set up a fintech-focused venture capital fund this year, in line with India’s proposal of fund-of-funds, to drive its goal of achieving numero uno position in the fintech space in the region. The VC fund, which will be managed by a third-party investment manager, will also look at investing in fintechs beyond Bahrain, Rumaihi said at the Bahrain GCC Financial Forum 2017.

The Central Bank of Bahrain (CBB), the banking and insurance regulator, has prepared a new white paper on fintech and blockchain, which will be shared with the industry soon. “We are also in the process of setting up a regulatory framework for crowd funding and peer-to-peer lending,” said Rasheed Mohammed Al Maraj, governor of CBB.

Unified currency: The GCC Monetary Union, on the lines of European Union, has begun to function from Riyadh, but a proposed unified currency across the Gulf Cooperation Council (GCC) countries will take time, according to the CBB governor.

“The GCC Monetary Union is a reality with Saudi, Qatar, Bahrain and Kuwait having agreed (to a common framework), but a monetary council will take time to launch,” he told an open town-hall session at the GCC Financial Forum 2017.

The governor said there were no plans to de-link the Bahraini dinar (BD) US dollar peg, claiming that the policy has helped bring stability and transparency during the oil-price drop. The roll-out of value-added tax next year is expected to beef up the government coffers by BD200-300 million.

The writer attended GCC Financial Forum 2017 in Manama at the invitation of EDB

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