Abu Dhabi courts fintech firms and investors to grow digital economy

ADGM inks deals to increase technology firms’ access to capital and new markets

Abu Dhabi Global Market Chairman Ahmed Ali Al Sayegh addressing FinTech Abu Dhabi 2018. Chris Whiteoak / The National

Abu Dhabi is luring a rising number of financial technology firms from the Middle East and beyond to its shores through new funding, mentorship and regulatory schemes, as part of its strategy to grow the UAE's digital economy.

On Monday, the emirate’s financial centre Abu Dhabi Global Market unveiled a package of new initiatives including a testing framework, or ‘sandbox’, for digital products, and a partnership with Abu Dhabi’s Department of Economic Development to help nurture technology entrepreneurs.

“In the last three years, ADGM has been building a globally-connected platform to support financial intermediation and facilitate capital flows for all companies, including start-ups and SMEs,” ADGM chairman Ahmed Al Sayegh told delegates at the Fintech Abu Dhabi event on Monday.

Fintech is disrupting traditional financial services by deploying advanced technology to speed up transactions, cut costs and better serve customers. Banks and other institutions are looking to collaborate with emerging fintech operators to future-proof their businesses, or risk becoming obsolete as tech-enabled rivals provide cheaper, faster services.

Arabian Gulf financial centres have responded by launching programmes such as start-up accelerators to stimulate growth of fintech, in line with strategies to diversify their economies and increase the contribution of SMEs to national gross domestic product.

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The ADGM ‘digital sandbox’ will serve as a testing environment to ensure regulatory compliance for technology start-ups in Abu Dhabi, Mr Al Sayegh, who is also UAE Minister of State, told the event. Start-ups will be able trade within a controlled environment before securing a full operating licence once their business is proven. The sandbox is in addition to ADGM’s Fintech Innovation Centre Accelerator programme, launched last year.

“The sandbox will give institutions and start-ups the ability to share data, solutions and ideas to accelerate digital adoption,” Mr Al Sayegh said. In addition, Abu Dhabi aims to create a “vibrant international capital marketplace that attracts global financial institutions and serves the wider financial industry”.

Access to capital and new markets has historically been a challenge for small businesses, particular during a period of low economic growth since oil prices fell in 2014.

During the event, ADGM said it became a member of the ASEAN Financial Innovation Network – the South-East Asia region’s network to link fintechs with financial institutions who may wish to adopt their products and services – as part of efforts to drive cross-border investment between Abu Dhabi and Singapore.

ADGM also said it will work with Emirates Development Bank to improve the cost and ease of obtaining SME bank loans.

In June it agreed an initiative with Hong Kong and Singapore to build a blockchain-based trade financing platform to stimulate cross-border fintech trade. And, last week, ADGM's Financial Services Regulatory Authority launched a framework for ‘private financing platforms’, to help companies raise financing from professional and angel investors.

"We have done a lot of things on the conventional finance front and on fintech –we were the first financial centre to introduce a regulatory fintech framework last year," FRSA chief executive Richard Teng told The National at Fintech Abu Dhabi.

In the coming months, ADGM will work to encourage more venture capital firms to set up in Abu Dhabi. Demand has lifted substantially since ADGM launched its VC managers’ framework last May, Mr Teng added.

Japan’s SoftBank, one of the world’s largest technology investment groups, whose SoftBank Vision Fund has interests in ride-hailing firm Uber and others, recently set up an office in ADGM to service the region. Abu Dhabi’s sovereign wealth fund Mubadala Investment Company has committed $15bn to the SoftBank Vision Fund.