Robo advisory firm Sarwa gets experimental permit to operate in Saudi Arabia

The licence will waive several requirements for the investment adviser

Mark Chahwan, co-founder and chief executive of Sarwa, said the FinTech platform is expanding regionally to help both nationals and expats in Saudi Arabia to invest with a robo-advisory. Antonie Robertson/The NationalShow less

The UAE-based robo-advisory investment platform Sarwa said it secured a financial technology experimental permit from Saudi Arabia's Capital Market Authority, allowing it to operate in the kingdom.

“The licence allows us to offer our wealth management services to make investing more low-cost, transparent and accessible to everyone in Saudi Arabia,” Mark Chahwan, co-founder and chief executive of Sarwa, said. “We are expanding regionally to help both Saudi nationals and expats to invest with a robo-advisory.”

The CMA issued the financial technology experimental permit instructions in 2018 to provide a regulatory framework that is conducive for FinTech innovation in Saudi Arabia.

The licence allows us to offer our wealth management services to make investing more low-cost, transparent and accessible to everyone in Saudi Arabia

The low-cost digital investment platform gauges an investor’s risk tolerance and assigns them a tailored investment portfolio of exchange-traded funds or index funds. It charges lower fees than traditional financial advisers and wealth managers.

"Customers will go online, answer a few questions about their age, investment horizon and we will recommend a diversified portfolio. Sarwa will manage their risk profile, reinvest dividends, rebalance portfolios and offer them advice through both technology and human advisers on how they are tracking towards their goals," Mr Chahwan told The National.

The experimental licence offered by the CMA will “waive several requirements for Sarwa to get to the market faster”, he said. This permit is usually valid for one year.

“If it had not been for this licence, we would have to abide by so many controls and admin-related things right from day one, which in turn would have hindered our understanding of the market and what people want,” Mr Chahwan added.

Sarwa was founded in 2017 in the UAE and received a full operating licence in November 2018 following its participation in the DIFC’s FinTech Hive accelerator programme.

The founder said the firm would consider expanding to other GCC markets after establishing its presence in Saudi Arabia.

“The kingdom is a huge market. They are not the first movers in the GCC in terms of FinTech, but every start-up wants to expand into the kingdom,” he said.

Sarwa, which currently has more than 20,000 users on its platform, witnessed a surge in first-time investors during the Covid-19 pandemic. However, about two-thirds of the company's business volume every month last year were from existing customers, Mr Chahwan added.

The business grew by more than five times in 2020. “This was a testimony to how retail investors reacted. They were resilient and either stayed the course or doubled down on their investment.”

The Saudi Central Bank recently granted a licence to a subsidiary of Kuwait-based telecom operator Zain Group to provide micro-financing services to consumers in the kingdom through a mobile app. The award of the licence to Tamam Financing Company, a FinTech platform set up by Zain Group in 2019, is the first of its kind by a regulator in the kingdom.