Chris Hafner of Grovelands on the promise for fintechs in the MENA region
Chris Hafner is the executive director of professional services firm, Grovelands. Here he speaks on the opportunities available to the fintech industry across the Middle East and Africa reigon.
Fintech’s ability to reach the unbanked and reduce cash transactions, alongside appropriate government and policy changes, hold great promise for the emerging markets in the Middle East and Africa.
Financial technology in the shape of digital banks are at the ready to deliver services on digital platforms in markets with high mobile penetration rates, with some at more than 100%. Enter these perfect marketplaces in the Middle East and North Africa (MENA).
Digital banks focus on digitisation of financial transactions by delivering basic banking services at the lowest possible costs. Whilst this is not a primary focus for fintechs, the unintended consequence of digitisation of financial transactions is demonetisation.
In the developed world, some digital banks such as the app-only Starling Bank in the United Kingdom, have struck partnerships with the Post Office so as not to leave out the ‘cash society’, yet in India, which is one of the world’s largest emerging markets, demonetisation has been a large part of the government’s anti-corruption strategy for a few years now.
Indeed, a fundamental transformative ingredient for fintech’s prosperity in the MENA region is anti-corruption.
For example, despite Egypt having the highest population in the Arab world, only one third have a bank account. The nation also scored 35 out of 100 on the Corruption Perceptions Index (CPI) issued annually by the Berlin-based Transparency International. While the World Bank Financial Inclusion Index may show high levels for some Middle East countries, this excludes the high levels of immigrant labourers who do not have access to these services.
India’s Prime Minister Narendra Modi used a demonetisation strategy to reduce the country’s corruption to advance its economic prospects, but countries in the MENA region could more positively focus on financial inclusion through supporting policy and investment in fintech start-ups. Financial Inclusion is another fundamental and transformative ingredient in the recipe for improved socio-economic outcomes, entrepreneurship and rates of innovation in emerging and evolving markets.
In the last year, Dubai announced a plan to triple its financial hub in an attempt to attract Fintech entrepreneurs to the region as it strives to be the financial centre of the region through the Dubai International Financial Centre, which opened in 2004.
Given the recent and unprecedented mergers and acquisitions (M&A) activity in banking in the region (coupled with the fact that there remains few and far between really experienced players in the Middle East M&A marketplace) the incumbents will require significant help, investment and focus on transaction support and post-merger integration. This will ultimately create an opportunity for fintech start-ups to focus on the unbanked and unmet customer needs while the incumbents focus on transaction execution and integration. There is a unique opportunity here for successful fintechs and for me, this mirrors the opportunities created when M-Pesa was first launched by the Kenyan mobile network operator Safaricom in March2007. M-Pesa quickly captured a significant market share for cash transfers, and grew to 17 million subscribers by December 2011 in Kenya alone.
The broader technology ecosystem holds the promise of being truly transformative. Beyond the impact of digital payments and associated demonetisation, true transformation will come from the broader ecosystem which includes telecom providers, governments and artificial intelligence technologies.
Digital identity initiatives in Uganda and Kenya are examples where micro-lenders can gain some assurance of repayment. Similar to wage garnishment in developed economies, those with outstanding payments due from a microloan can have a portion of their mobile top-up redirected to the lending party by the telecom operator. These types of assurances or guarantees will help create greater confidence in microloan lenders and continue to support entrepreneurial efforts in the region.
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Artificial intelligence is another area where financial services can be expanded in the region.
According to World Bank Group’s 2018 Data Book on Financial Inclusion, 39.9% of the population in the MENA region live in rural areas.
Using technology to improve data collection and machine learning algorithms to make credit decisions, we can expedite the lending process, better manage risk and lower lending costs. This is a must, especially given the smaller size of the loans against the current cost to service such small loans. Using computer vision technologies, asset backed loans can be processed faster and at a lower cost. Take a picture of your motorbike against which you want to borrow and the algorithms determines its potential value, combined with a digital identity and fintech, loans are almost instant.
The fintech opportunity for growth extends beyond the MENA region. Given the expanding Islamic population in developed markets such as Australia and the United Kingdom, there exists an opportunity for an all-digital, app only Shari'ah-compliant offering.
Therefore, MENA-focused fintechs would do well to consider expanding outside the region as they have the intelligence, education and expertise to service the need.
5 minutes with... Janthana Kaenprakhamroy, CEO, Tapoly
Founder and CEO of award-winning insurtech firm Tapoly, Janthana Kaenprakhamroy heads up Europe’s first on-demand insurance platform for the gig economy, winning industry awards, innovating in the digital insurance space, and leading with inclusivity.
Here, Business Chief talks to Janthana about her leadership style and skills.
What do you do, in a nutshell?
I’m founder and CEO of Tapoly, a digital MGA providing a full stack of commercial lines insurance specifically for SMEs and freelancers, as well as a SaaS solution to connect insurers with their distribution partners. We build bespoke, end-to-end platforms encompassing the whole customer journey, but can also integrate our APIs within existing systems. We were proud to win Insurance Provider of the Year at the British Small Business Awards 2018 and receive silver in the Insurtech category at the Efma & Accenture Innovation in Insurance Awards 2019.
How would you describe your leadership style?
I try to be as inclusive a leader as possible. I’m committed to creating space for everyone to shine. Many of the roles at Tapoly are performed by women and I speak at industry events to encourage more people to get involved in insurance/insurtech. Similarly, I always try to maintain a growth mindset. I think it’s important to retain values to support learning and development, like reliability, working hard and punctuality.
What’s the best leadership advice you’ve received?
Build your network and seek advice. As a leader, you need smart people around you to help you grow your business. It’s not about personally being the best, but being able to find resources and get help where needed.
How do you see leadership changing in a COVID world?
I think the pandemic has proven the importance of inclusive leadership so that everyone feels supported and valued. It’s also shown the importance of being flexible as a leader. We’ve had to remain adaptable to continue delivering high levels of customer service. This flexibility has also been important when supporting employees as everyone has had individual pressures to deal with during this time. Leaders should continue to embed this flexibility within their organisations moving forward.
They say ‘from every crisis comes opportunity’, what opportunities do you see?
The past year has been challenging, but it has also proven the importance of digital transformation in insurance. When working from home was required, it was much harder for insurers to adjust who had not embedded technology within their operating processes because they did not have data stored in the cloud and it caused communication delays with concerned customers at a time when this communication should have been a priority, which ultimately impacts the level of customer satisfaction. This demonstrates the importance of what we are trying to achieve at Tapoly in driving digitalisation in insurance and making communication between insurers and distribution partners seamless.
What advice would you give to your younger self just starting out in the industry?
Start sooner, don’t be afraid to take (calculated) risks and make sure you raise enough money to get you through the initial seed stage.