The Cambridge Centre for Alternative Finance (CCAF) at Cambridge Judge Business School, University of Cambridge, with MENA regional partner ADGM Academy, published the FinTech Regulation in the Middle East and North Africa (MENA) study, which reviews how FinTech and wider Digital Financial Services (DFS) challenges have been met by the regulatory efforts and regulatory innovation initiatives across MENA region jurisdictions.
The study, which is the second in a series of three, following the already published report for Sub-Saharan Africa and the soon to be published report for the Asia Pacific region, has been foundationally funded by the UK Foreign, Commonwealth & Development Office (FCDO).
The report builds on the CCAF’s prior research in the region by focusing on a representative sample of MENA jurisdictions. By collecting data, the report identifies existing regulatory frameworks and combines it with previous CCAF research including Regulating Alternative Finance and the Global COVID-19 FinTech Regulatory Rapid Assessment Study. The report also identifies the regulatory innovation initiatives across all MENA jurisdictions.
The study considered regulatory frameworks for eMoney, digital payments, peer-to-peer (P2P) lending, equity crowdfunding and international remittances, as well as identifying existing frameworks for cross-sectoral themes that impact FinTech – including data protection, anti-money laundering (AML), cybersecurity, financial consumer protection, electronic Know-Your-Customer (eKYC) and open banking.
The findings of the study note that 92% of sampled jurisdictions have established regulatory frameworks for payments, with 8% of these specific to digital payments – underlining the dominance of the payments subsector relative to other FinTech verticals, in terms of the level of business and start-up activity. Similarly, 92% of sampled jurisdictions in MENA have regulatory frameworks in place for eMoney – with 42% creating a specific framework for the purpose and 50% regulating via a general payments framework. There are 67% of sampled jurisdictions in MENA that have a bespoke framework that regulates P2P lending with a further 17 planning to introduce a framework. In addition, 69% of the sampled MENA jurisdictions have a bespoke equity crowdfunding framework with 8% planning to introduce one.
In respect of data protection, an area of concern elevated by the COVID-19 pandemic, 69% of sampled jurisdictions have a broad framework in place, with a further 23% planning to introduce one. There is an increasing interest in creating open banking frameworks: 23% of jurisdictions have a framework in place, with 54% planning to introduce such a framework.
In terms of regulatory innovation initiatives, the study identified 12 Innovation offices across the region (with a further one planned), up from five in 2019. There are also 11 regulatory sandboxes in place (with a further five planned), up from four in 2019. MENA regulators reported several obstacles in establishing such initiatives, including, limited technical skills (reported by 75% of surveyed MENA regulators), the need to co-ordinate activities with other regulators (50%) and the small size of the industry making it harder to justify a supervision regime.
“In the Middle East and North Africa region, regulators have taken positive steps to create an enabling environment for FinTech through a combination of regulatory frameworks and regulatory innovation initiatives,” says Robert Wardrop, Director and Co-founder of the CCAF. “This study assesses how a range of FinTech activities are regulated in the region, including understanding which regulators have a mandate for specific FinTech verticals, and whether activities are regulated by existing or bespoke frameworks, as well as noting which regulators plan to introduce regulatory frameworks in the near term.”
“The MENA region has seen a rapid increase in FinTech activity and there is evidence of regulators adapting,” says Alexander Apostolides, Acting Lead, Regulatory Innovation, CCAF. “However, the existence of regulatory frameworks is uneven, both in FinTech verticals and in terms of jurisdictions.”
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