From oil-based to knowledge-based economy: Bahrain emergence as a financial innovation hub
Last week, the Crown Prince of Bahrain bin Salman met with Bahraini entrepreneurs and winners from the Startup Bahrain Pitch series, which was organised by StartUp Bahrain, the premier platform for startups in the Kingdom of Bahrain. Bin Salman underscored the significance of endorsing innovation and entrepreneurship in Bahrain. He emphasised the private sector as a major engine of economic growth and advances Bahrain's comprehensive development process.
In recent years, Bahrain has made outstanding progress in recent to become the Middle East's leading financial innovation hub. Leveraging its strategic location in the Persian Gulf for international trade, the tiny island nation has started a transformative journey, moving from oil-based to knowledge-based economy. Bahrain is a strategically important location because a large portion of the petroleum in the West must transit before it can reach the open ocean.
Bahrain has gradually emerged in its position as the financial hub of the Middle East for over three decades.
The biggest non-oil sector contributor to Bahrain's real GDP is the financial sector. With over 67% of the workforce consisting of nearly 14,000 Bahrainis, the financial sector is also the country's largest employer. This emergence as an innovation hub, especially in the financial sector underscores Bahrain's commitment to diversifying its economy beyond traditional sectors such as oil and gas, and positioning itself as a regional leader in the knowledge-based economy of the 21st century.
The Fintech Bay
Bahrain's FinTech Bay was launched in 2018 and it is the Middle East's largest financial technology centre and one of Bahrain most important initiatives, focusing on investing in innovation through advanced laboratories, business accelerators, and educational programmes. According to a press release from the Bahrain Economic Development Board, the hub aims to accelerate the development of fintech firms and facilitate communication among investors, entrepreneurs, government bodies, and financial institutions. Bahrain's commitment to fostering innovation goes beyond its borders, as evidenced by initiatives to attract international talent and investment.
Aion Digital
Aion Digital is one of the GCC's most promising FinTech startups. Launched in 2017, Aion is a fully mobile platform for building secure digital banks. "Aion's mission is to enable existing banks in the GCC to go digital with certainty," stated Ashar Nazim, Group CEO. Aion provides banks with a quick and inexpensive digital launch. It was specially designed with the GCC's business and regulatory environment in mind. By using Aion, Banks can increase their customer base beyond their traditional clientele while saving up to 80% on acquisition costs. Last year, Aion Digital has raised $5 million in a bridge funding round by Fintactics Ventures, a fintech-focused Venture Builder.
Bahrain's beneficial regulatory environment is one of the main forces behind the country's rise to prominence as an innovation hub. To encourage entrepreneurship and draw in foreign investment, the government has promoted a number of initiatives. The Economic Development Board (EDB) of Bahrain has played a pivotal role in promoting an innovative culture and enabling the formation of startups. The implementation of regulatory sandboxes, which offer a regulated setting for businesses to test novel goods and services, has had a particularly significant effect. This programme speeds up innovation by enabling startups to test new concepts without being hindered by onerous regulatory requirements.
Fintech startups operating in Bahrain have received significant backing from the government. In Bahrain, there are currently about eight investment entities that are making fintech investments. Only 25% of local and regional investors surveyed by BFB had an active fintech-only fund, despite the fact that investors have a 100% focus on the fintech sector. But one of the main reasons fintech became an investor's top priority was that it was thought to be the fastest-growing industry in terms of local, regional, and international funding activities.
Going forward, Bahrain is expected to make significant progress in its transformation into a worldwide centre of innovation. The nation's future as a knowledge-driven economy is bright thanks to the government's unwavering dedication to supporting entrepreneurship and its wise investments in infrastructure and human capital. Through leveraging innovation, Bahrain is not only revolutionising its own economy but also influencing the future of the Middle East region in general. Bahrain's success is a source of inspiration for other countries in the region, as the small island nation exemplifies what can be accomplished with visionary leadership, strategic planning, and a never-ending quest for innovation.
Sources :
Bahrain Economic Development Board (BEDB). “Bahrain, An Established Financial Services Sector.”
Bahrain Association of Banks. “Banking in Bahrain.”
Zawya. 2019. “Waqfe Unveils Next Generation Banking Platform Called Aion Digital.”
Bahrain FinTech Bay. FinTech Ecosystem Report.
