Six FinTech innovations will boost financial inclusion levels for Mena's unbanked

Financial technology that helps residents manage their money more effectively is urgently needed in the region

Siddiq Farid, chief executive of Smart Crowd, a digital real estate investment platform that allows individuals to invest in real estate for as little as $1,300, democratises access to investment services. Antonie RobertsonShow less

Six FinTech innovations will boost financial inclusion levels for disadvantaged communities in the Middle East and North Africa, according to Village Capital, which urges regulators and investors to support start-ups.

Savings and wealth building tech, employment tech, digital ID, financial literacy, access to capital and alternative lending, will all improve the financial health for the region's unbanked by democratising access to financial services, according to The State of Financial Health Start-ups report from the financial health accelerator, which was endorsed by MetLife Foundation.

Covid-19 has accelerated the already pressing need for services that bring the advantages of financial inclusion to large swathes of the population …

“Covid-19 has accelerated the already pressing need for services that bring the advantages of financial inclusion to large swathes of the population and by extension national economies,” said Alicia Sornson, manager programmes and partnerships in Mena, at Village Capital.

“Regulators and investors are among the best placed to create the conditions that allow innovation to thrive."

Financial technology that helps people manage their income, expenses, weather financial shocks and plan for a healthy financial future is urgently needed in the Mena region, which has the largest number of unbanked globally, according to the report.

Less than one in five adults in region hold bank accounts, which causes issues accessing financial services while electronic payments are still nascent and 85 per cent of all transactions are still cash based.

However, regional FinTech companies, which focus on lowering fees, reducing transfer times and making finance accessible to all, are set to attract $2.5 billion (Dh9.18bn) in investment by 2022, according to a separate study by Mena Research Partners.

Dubai International Financial Centre, for example, invested in four FinTech start-ups focused on improving the personal finances of residents across the region, including the roboadvisory Sarwa, earlier this month from its $100 million FinTech Fund.

The six FinTech innovations that will boost the region's financial health include:

1. Savings and wealth building tech

Most investment management firms in the region have “high fees and only work with wealthy clients” according to Village Capital. “Also, the barriers to entry for sources of investment income such as real estate tend to be high."

Financial health start-ups such as Rumman – a micro-saving investment app in Palestine or SmartCrowd in the UAE – a digital real estate investment platform that allows individuals to invest for as little as $1,300 – are companies democratising access to investment services, the report said.

2. Employment tech

With half of the Mena’s population aged under 25, the region has the highest rate of youth unemployment with more than a quarter of the population out of work last year, according to the financial health accelerator.

Financial health start-ups such as Kader in Jordan, which digitises recruitment for high turnover jobs in the hospitality and retail sectors, and Khtwteen in Egypt – which offers a better work-life balance through location-based jobs and part-time work – are creating systems that make it easier for people to find employment and the stability needed to become financially healthier, according to the survey.

3. Digital ID

Many in the region are unable to provide the basic identification they need to access formal financial services like a bank account. With the underbanked including "migrants or refugees who arrive in their new home without any paperwork" tech-based solutions that create digital identities for individuals and displaced populations are vital.

Start-ups such as Hawiyati in Jordan and the US, which enables mobile populations to record important information about their credit history and employment, and Valify Solutions in Egypt, that allows service providers to digitally identify their customers, will address the issue, according to the report.

4. Financial literacy

Financial literacy rates in the region can be as low as 13 per cent, such as in Yemen, according to the survey. Financial health start-ups such as Finllect in the UAE, a money management application where users can track and categorise their spending and build a budget, and the personal wellness app Merakido in Egypt, offer financial literacy through mobile phones and technology.

5. Access to capital

Small and medium-sized businesses account for 96 per cent of registered companies and about half of employment in the region, yet those businesses receive only 7 per cent of total bank lending – the lowest in the world, according to the survey.

Financial health start-ups such as Fawaterak in Egypt, an invoicing system for SMEs, and Fundbot in Lebanon, that helps SMEs access bank credit to fund working capital needs, are increasing access to traditional finance.

6. Alternative lending

Tight regulations have led to a $360bn credit gap for SMEs in the Middle East, however a lack of trust in alternative lending has slowed the development of this field. Pioneering financial health start-ups include Ciwa in Morocco, a digital lending application that offers traceability to previously informal financial transactions. and micro-lending platform Solfeh in Jordan, according to the report.