Bahrain's relatively small market size is emerging as an advantage for its entrepreneurial development as it affords businesses closer co-operation both with each other and the government, a top executive of the kingdom's economic planning body said.
Technology has always been a significant part of the GCC state's economy, keeping its economic vision stable as public-private partnerships continue to grow, Musab Abdulla, executive director of business development at the Bahrain Economic Development Board, told The National in an interview at Gitex Global in Dubai on Wednesday.
"Our small size is an asset; in Bahrain, you get speedy access to senior decision makers, and you don’t feel isolated or the layers of bureaucracy," he said.
"We rely on innovation and trying out new ideas to prove that they work, so we can become a favoured destination."
Mr Abdulla added that the biggest regional investors in Bahrain's economy are the UAE, Saudi Arabia and Kuwait.
Bahrain is banking on the technology sector to drive its economy, and it has emerged to become one of the region's top destinations for start-up investments.
Investments in the kingdom surged almost eightfold to $116 million in the first half of 2022, placing the country in fourth place in the Middle East and North Africa, start-up platform Magnitt said in a recent study.
Earlier this month, Bahrain EDB said it was able to attract $921 million in direct investment from 66 companies during the first three quarters of 2022, which are expected to generate more than 4,700 jobs over the next three years.
For ICT alone, the board announced at Gitex on Wednesday that it was able to capture $98m worth of direct investments from 14 international companies during the same period, and this is expected to create more than 770 jobs to help Manama's economic recovery plan.
Bahrain's economy, meanwhile, expanded almost 7 per cent in the second quarter of 2022 to post its highest growth rate in the past 11 years, driven by a strong performance in the country's non-oil sectors.
That significantly outpaces the 3 per cent full-year growth projected by National Bank of Kuwait in May.
At present, more than 70 per cent of Bahrain's government services operate from the cloud on the back of a good number of cloud-based organisations that have emerged in recent years, Mr Abdulla said.
The progress in Bahrain's entrepreneurial scene has led to a reversal of roles in venture capital funding, with VC firms now "hunting" high-potential companies to invest in, said Fajer Al Pachachi, general manager of Hope Fund, an entrepreneurial training programme.
"This is a positive for start-ups and SMEs as it shows hunger from the VCs. They are looking for founders who have the right skill set to accelerate businesses," she told The National.
Ms Al Pachachi said that while Bahrain tries to be sector-agnostic when it comes to start-ups, most VCs tend to look towards technology start-ups because the scaleability potential is "great and grows much faster".
"We have the right talent and infrastructure to compete regionally and internationally," she added.
Hope Fund has a reality show that gives local start-ups the opportunity to receive investment from a panel of investors.
To expand its reach and boost its resources, it signed a partnership with the UAE Ministry of Economy that saw start-ups from the Emirates participate. Ms Al Pachachi said the fund is planning to sign more agreements with "one or two" GCC countries.
"Bahrain’s asset is its talent. We want to see Bahraini businesses on the global map and potentially have the next unicorn," she added, referring to start-ups with a valuation of $1 billion or more.
Financial technology, meanwhile, is emerging as a key sector as it promotes financial inclusion by providing residents opportunities to own bank accounts, said Bader Sater, chief executive of Bahrain FinTech Bay.
He acknowledged, however, that the industry is still looking to grow, and Bahrain's tight-knit ecosystem is helping this cause.
"We're still looking to grow the effect of FinTech in terms of innovation and entrepreneurship. The local market still has a lot of opportunities and growth," he told The National.
Mr Sater noted that the industry in the kingdom is growing organically: "We've seen staff of existing FinTechs leave those companies so they can help set up others, spinning off their own FinTechs from that," he said.
FinTech led funding raised in the Mena during the first half of the year, surging more than three-fold to $234m, Magnitt said.
"It's a driver for the economy, and we see more and more homegrown FinTech solutions coming up as the ecosystem matures," he added.