Developing Bahrain and the UAE into FinTech Hubs A Timeline of Activity (as of July 2019) Kingdom of Bahrain (Bahrain) FinTech-related Policy & Regulatory Developments Collaboration & Outreach United Arab Emirates (UAE) FinTech-related Policy & Regulatory Developments Collaboration & Outreach 1 Bahrain FinTech-related Policy & Regulatory Developments (2014–July 2019) 2014 The Central Bank of Bahrain created two new license types—payment services and card processing services—marking the entry of non-bank companies into banking services.1 December 2015 December 13, 2015: The Central Bank of Bahrain, in collaboration with the Benefit Company, launched the Electronic Fund Transfer System (EFTS). "Through the EFTS network, all local banks and major billers are interconnected to enable near real-time fund transfer up to BD1,000 via the Fawri+ service. Additionally, users can opt for other services enabled by this network such as the deferred settlement fund transfer service...."2 January 2016 January 17, 2016: Bahrain's non-oil sector grew 4.2 percent in the first nine months of 2015. "In recent months, Bahrain has seen a number of developments in the financial services, ICT and manufacturing sectors. In November the Central Bank of Bahrain, in collaboration with the local Benefit Company, launched a pioneering Electronic Fund Transfer System (EFTS) that connects all retail banks in the Kingdom with each other and with major billers in order to increase the efficiency of fund transfers."3 May 2016 May 25, 2016: A roundtable session organized by the Economic Development Board of Bahrain was held in Bahrain Financial Harbour and focused on ways to promote innovation in payment services. "The discussion focused around strengthening cooperation between stakeholders in order to develop infrastructure for the payments industry, enhance its potential and support the ongoing efforts towards leadership in service innovation. The meeting resulted in a list of recommendations for the support of the industry and its development, as well as an action plan to follow up on progress and implementation."4 July 2016 July 20, 2016: In the first quarter of 2016, economic growth reached 4.5 percent, driven by double-digit growth in the oil sector. Financial services grew 3.1 percent year-on-year.5 October 2016 October 26, 2016: Bahrain's non-oil sector grew 3.6 percent in the second quarter of 2016, with the financial sector growing 4 percent in Q2 2016. "Growth across the private sector was also supported by growth in bank credit, with the average annual rate of credit growth during the first half of the year reaching 7.2%, and the cost of credit remaining stable, declining slightly in the course of the first half of the year."6 February 2017 February 19, 2017: According to the Economic Development Board, 40 new companies invested a total of BD106 million in Bahrain. "The companies represent regional and international organisations, including companies from India, China, the United States, and Germany among others. 17 companies specialise in manufacturing and logistics, 7 in financial services, 7 in leisure and tourism, 7 in professional services and 2 in information and communication technology."7 March 2017 March 7, 2017: Non-oil sector growth reached nearly 5 percent in the third quarter of 2016. "There was strong expansion across a range of sectors, with particularly robust performances in social & personal services, construction and financial services."8 2 April 2017 April 3, 2017: The Economic Development Board and the Central Bank of Bahrain announced an outreach program to financial institutions and banks in the Kingdom focused on three financial laws: Trusts Law, Investment Limited Partnership, and Protected Cells Companies. “Bahrain has become the first country in the GCC region to integrate this type of laws into its legal system nationwide. Other jurisdictions have issued such limited partnership laws through free zones only. The laws enhance the sector competitiveness and create new funding mechanisms. The Limited Partnership Law is expected to provide a strong boost to the sector, supporting growth in real estate funds, private equity funds, venture capital and technology funds, startups, and Shariah compliant funds, as well as captive insurance. The introduction of the Trusts Law aims to regulate the creation of a trust and its liabilities, as well as allowing establishment of a trust for charitable and non-charitable purposes. Meanwhile, the Protected Cell Companies law is looked to allow strengthening investors’ rights in separating their private assets from company running the fund, as well as lowering running costs.”9 April 24, 2017: The Information & eGovernment Authority of Bahrain announced a Cloud First Policy to reduce the cost of government ICT, to increase security using accredited platforms, and to increase productivity and agility to improve citizen services.10 May 2017 May 10, 2017: The Central Bank of Bahrain announced a close partnership with BENEFIT to launch the first phase of the national electronic wallet by June 2017. “The wallet will enable instant payments via smart phones and will facilitate the collection of payments electronically through debit, credit and prepaid cards and online bank accounts, for online and in-store purchases. Customers will also be able to transfer funds using the wallet for Fawri, Fawri Plus, online bill payment and other types of payment services that will be available in the future.”11 May 28, 2017: According to the Economic Development Board of Bahrain, the country's non-oil sector grew 3.7 percent in 2016. "The non-oil growth (up from 3.6% in 2015) was driven by a number of sectors, with particularly strong performances in finance (one of the largest non-oil sectors, which grew 5.2% during the year), construction (which grew 5.7%) and social and personal services (which grew 9.1%)."12 June 2017 June 14, 2017: The Central Bank of Bahrain (CBB) opened its regulatory sandbox. “The framework provides a virtual space for companies to test their technology- based innovative solutions, and is open to existing CBB licensees and other local and foreign firms. The testing duration is nine months, with a maximum extension of three months. In order to be eligible, solutions need to demonstrate innovation, customer benefit, technical testing, and an intention to be deployed in Bahrain after the sandbox period ends.”13 August 2017 August 6, 2017: The Economic Development Board of Bahrain announced non-oil sector growth accelerated past 4 percent in the first quarter of 2017. Financial services expansion exceeded 8 percent at the end of Q1 compared to 5.2 percent in the first quarter of 2016.14 August 10, 2017: The CBB released regulations for both conventional and Sharia- compliant financing-based crowdfunding businesses. Both regulations are essentially the same, though the CBB placed an additional requirement on Sharia-compliant financing-based crowdfunding platforms. That requirement ensures the financing 3 structure is Sharia-compliant by engaging with a Sharia advisor or outsourcing this function to a third party.15 August 29, 2017: The Central Bank of Bahrain announced the first two entrants into its regulatory sandbox. "Tramonex, a London-based forex cash management solution for businesses; and NOW Money, the Dubai-based account and remittance service for low-income workers in the GCC."16 October 2017 October 22, 2017: The CBB announced the formation of a dedicated FinTech Unit responsible for “the approval process to participate in the Regulatory Sandbox, supervision of licensed companies’ activities and operations—including cloud computing, payment and settlement systems—and monitoring technical and regulatory developments in the FinTech field.”17 November 2017 November 20, 2017: The Economic Development Board (EDB) of Bahrain announced the growth of the country's non-oil sector exceeded 4.5 percent in the first half of 2017. The financial services sector expanded by more than 7 percent year-on-year. "During the first half of this year, initiatives such as pioneering crowdfunding regulations, a regulatory sandbox for fintech companies and a Cloud First policy (designed to help organisations take advantage of cloud technology), have dramatically improved Bahrain’s business environment. Bahrain is successfully positioning itself at the forefront of innovation at a time when the growth prospects for the Gulf economies are becoming increasingly tied to productivity," said Jarmo Kotilaine, chief economic advisor of the Bahrain EDB.18 December 2017 December 12, 2017: Bahrain FinTech Bay (BFB) announced a strategic partnership with Bahrain Development Bank and Rowad. "Bahrain Development Bank will be a founding partner of BFB and will work closely with the BFB to deliver certain initiatives supporting Fintech entrepreneurship, through its Rowad Platform which includes the Rowad Program, Seed Fuel-Rowad, and the Invested Platform. This will provide entrepreneur support programs, access to the BFB for the Seed Fuel program for qualified Fintech companies of up to BHD 25,000 in equity investment, and the ability access the investor platform, InvestedTM."19 January 2018 January 15, 2018: The CBB authorized three Regulatory Sandbox applicants (Wahed, Inc., BitArabia, and Belfrics), allowing the firms to test their solutions in the Kingdom. Previously, the Central Bank of Bahrain authorized three other applicants to test their FinTech solutions within the CBB’s Regulatory Sandbox—Tramonex Limited UK, Norwex WLL, and Rain Financial.20 February 2018 February 12, 2018: In the first nine months of 2017, growth in Bahrain's non-oil sector reached nearly 5 percent. Bahrain's financial services sector expanded more than 6 percent over the first three quarters. "All of this points to the continued strong progress of economic diversification in an economy where the non-oil sector collectively already generate more than 80% of GDP."21 February 18, 2018: The Bahrain Economic Development Board announced a record year for foreign direct investment in 2017, having attracted 71 new companies to the Kingdom with investments amounting to US $733 million.