Dubai launched the Middle East, Africa and South Asia (MEASA) region’s first fintech accelerator in January, as efforts to update the legal framework for crowdfunding activities in the financial sector also make headway.
With the emirate looking to take advantage of growth in fintech investments worldwide, in January the Dubai International Financial Centre (DIFC) announced a partnership with technical and professional services provider Accenture to launch FinTech Hive at DIFC.
Scheduled to begin operations in the second quarter of this year, the accelerator aims to provide a low-cost route for the development of fintech companies, while giving them the tools, advice and support to develop or deploy advanced technology, according to Sushil Saluja, Accenture’s senior managing director for financial services in Europe, Africa, the Middle East and Latin America.
“The accelerator programme will identify the best entrepreneurs within the financial services industry and grant them invaluable access to and feedback from potential customers and funders,” he said told media at the launch of the partnership.
As well as helping select up-and-coming industry players, the project will also allow them to collaborate on innovations with executives from regional and international financial institutions.
Dubai-based lenders Emirates NBD and Mashreq Bank have signed on to join the programme, while international players Citibank, HSBC, Standard Chartered and Visa have also committed to taking part.
The FinTech Hive at DIFC project consists of a 12- to 15-week accelerator programme, providing new market entrants with the opportunity to address and discuss emerging trends in the fintech industry as well as devise solutions to common challenges facing the financial services industry across the MEASA region.
Fintech investments worldwide last year rose by 10% to $23.2bn on the back of 22% growth in 2015. Spending in Asia accounted for almost $11bn of the 2016 total, outstripping outlays in both North America and Europe, according to figures released by data and analytics firm CB Insights in early 2017.
Dubai itself is eyeing $1bn in fintech investments through to 2022, according to DIFC projections. However, this still only represents a fraction of the $150bn worth of investments the global industry is expected to achieve in the next three to five years, according to PwC’s “Blurred Lines: How Fintech is Shaping Financial Services” report published in March last year.
According to Pinaki Aich, vice president of Group Strategy at DIFC, the MEASA region has historically attracted little venture capital funding due to both a lack of perceived exit opportunities and the difficulties associated with attaining scale. “Scalability is essential,” he told OBG, “The UAE has a population of 8m, so even if a start-up manages to capture 1% of the market in five years, which is a strong showing, that is still only 80,000 people.”
Aich believes, therefore, that the greatest opportunities in fintech are in high-volume areas such as remittances or in using Dubai as base to enter other markets with more sizable populations. “FinTech Hive at DIFC is not just looking to attract entrepreneurs interested in the local market but those who see potential in the broader region,” he said. “Dubai can serve as a bridge between India and sub-Saharan Africa, for example, where many of the challenges in the financial services space are similar and in need of innovative solutions.”
Rising investments in the fintech segment and the DIFC’s new focus on start-ups are also driving a process of reform in Dubai’s legal framework, with regulators seeking to keep pace with the new developments.
To this end, the Dubai Financial Services Authority (DFSA) – the financial regulatory agency for the DIFC – is currently undertaking a consultative process on the proposed legislation it has prepared for regulating crowdfunding platforms in the DIFC.
These moves reflect the increasing importance of this funding source for the country’s SME sector, according to Ian Johnston, CEO of DSFA.
“Our approach remains consistent for loan-based and investment-based crowdfunding platforms in its aim to define a clear structure for the sustainable development of this industry,” he told told local media in mid-February.
The present round of consultations with stakeholders and those in the financial sector covers the specific risks associated with investment-based crowdfunding, which allows start-ups or small firms to raise funds through selling stakes in their companies.
Greater certainty in the regulatory framework and a supportive environment in an already expanding market could see a wave of new fintech firms using Dubai as a launch pad into the fintech sub-sector.
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