As part of the Bahrain Economic Development Board and Thomson Reuters' Bahrain Islamic Venture Capital Report that focuses on the regulatory and market infrastructure needed for building a venture capital ecosystem in Bahrain, Bahrain Economic Development Board Executive Director (Business Development & Financial Services) David Parker answers questions about Bahrain's FinTech and venture capital industry development assets, as well as the country's current entrepreneurial tech culture and ecosystem.
The report can be downloaded from HERE.
Q: Recently, we have seen many GCC countries begin to develop viable FinTech ecosystems, and in Bahrain the Economic Development Board has kicked-off a series of initiatives to develop the country as a FinTech hub. What do you feel are the key challenges that you will be facing in developing Bahrain into a FinTech hub? How much FinTech development is required for Bahrain to position itself as a regional hub, and how much can Bahrain leverage the developments elsewhere in the region and globally?
David Parker: Bahrain, like most countries around the world,is always trying to find new ways to create theright ecosystem for innovation and startups; asthe needs are always changing. FinTech firms— just like other startups and innovators — willneed the right support in terms of mentorship,funding, human capital and training.
There will also be specific requirements around regulation and we have had very positive discussions with the Central Bank of Bahrain around creating a regulatory sandbox that will help foster innovation without compromising the stability of the broader financial sector.
The development of FinTech in Bahrain will be supported by looking at best practice internationally but sometimes it will also be products and services being developed locally — for example in areas like Islamic finance, where Bahrain is one of the most advanced global centres and has long been a pioneer.
Q: The technology start-up scene has changed dramatically in Bahrain the last few years. What are the key elements that supported this evolution and what improvements can be made to further increase this sector’s contribution to GDP and job creation?
There are several government initiatives that have been established over the last few years in support of an entrepreneurial tech culture in Bahrain. We have seen the establishment of several accelerators – including the first cloud based accelerator in the MENA region, established by UK-based C5 alongside AWS. We have also seen the development of a supportive ecosystem – including government support for training through Tamkeen, and a range of sources of finance (including angel investors).
It is important to note that the World Bank Group in its ‘Doing Business Report 2017’ named Bahrain as one of the ten countries most improved across three or more areas, in this year’s case; ‘starting a business’, ‘getting credit,’ and ‘trading across borders’. All of these areas support technology start-ups and the environment in which they operate.
Trading across borders became much easier by improving infrastructure and streamlining procedures at the King Fahd Causeway. The Kingdom also improved access to credit information by adopting new regulations that guarantee by law borrowers’ rights to inspect their credit data. Clients of a credit bureau now have the right to obtain a free credit report once every 12 months, to add information to their credit report and to file a complaint or objection related to the accuracy or limitation of the information contained in their credit report. Regulatory changes also made it easier to start a business by reducing the paid-in minimum capital requirement. These reforms highlight several of the initiatives taken by the government over the last few years and it will certainly support prospective and current startups in the Kingdom.
Q: What do you feel are the key components of the wider ecosystem that are required to support FinTech entrepreneurs and venture capital investors? How developed are these in Bahrain, and what is the plan to develop them further?
Bahrain has experienced some major developments over the last few years that support the wider ecosystems for FinTech entrepreneurs and venture capital investors. For example, in the funding space, the Bahrain Development Bank offers financial services that are tailored to meet an SME’s needs. 500 Startups, a leading global venture capital seed fund and startup accelerator headquartered in Silicon Valley, recently announced the launch of the $30 million 500 Falcons fund, targeting the MENA region. Tamkeen, an organization dedicated to providing workforce training and education, provides several opportunities for entrepreneurs in Bahrain to receive mentorship and coaching to grow their ideas and expertise.
Outside of these initiatives, Bahrain still boasts the Middle East’s most liberal and advanced ICT infrastructure and policies, with the experience and knowledge to allow regulation to evolve and work with innovative businesses in a fast-changing sector.
However, we know we can still make some improvements. That is why we are working with the Ministry of Industry, Commerce and Tourism and the Central Bank of Bahrain (CBB) to identify regulatory improvements that will continue to ease the process of doing business.
Q: How does the entrepreneurship ecosystem in Bahrain compare to other markets in region. What can Bahrain take from the experience of others and what areas can other countries learn from the example set in Bahrain?
Perhaps the biggest differentiator is the people here — Bahrain-based startups benefit from a local culture of entrepreneurship. A survey from Ernst & Young found that 70% of young Bahrainis are interested in the idea of starting their own business, twice as much as anywhere else in the Gulf.
Additionally, due its size, openness, and forward-thinking approach, Bahrain has proven to be an ideal testing ground for the introduction of new technologies to the region and the Kingdom has experienced a fast rate of innovation.
The government has also worked hard to create a supportive environment that will allow entrepreneurs to thrive and the Bahrain model is endorsed by UNIDO, with over 40 countries following it. This puts us in a strong position to attract entrepreneurs from around the region and to support their growth.
In your opinion, what consequences will global economic trends have on venture capital development in Bahrain? What are the challenges that should be tackled to provide a conducive environment for venture capital investment in Bahrain?
Any financial flows will be susceptible to global market conditions, but we are confident that the strong growth profile in the GCC will continue to underpin demand.
Investors will respond to opportunities — so the main challenge will be in ensuring there is an ecosystem that can help to create the investment opportunities businesses are seeking. Again, there may be some regulatory changes required to enhance the attractiveness of the environment, so the fact that Bahrain has a single, well-respected regulator with a long track record, is a strong point in our favour.
Copyright Thomson Reuters 2016
DAVID PARKER is currently Executive Director of Financial Services at the Economic Development Board. He is charged with supporting Bahrain’s financial industry locally and internationally with a particular focus on attracting new inward investment opportunities to the Kingdom. David and his team work closely with key stakeholders in Bahrain to create a business friendly environment for indigenous businesses and inward investors alike.
David was previously Commercial Director with Oxford Intelligence Ltd, an international inward investment consulting firm, part of Ecorys Group.
During a career spanning 25 years David has worked on inward investment assignments in the financial and technology sectors across the globe. These assignments have included heading Invest Hong Kong in London and also heading International Business Wales in North America based out of New York. He has a particular passion for innovation in finance and fintech.
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