How far has the Islamic fintech space come in the last few years?

Not as far as we would like. We are interested in Islamic fintech from several different angles. First of all, we want to see more Islamic banks

innovating. Were starting to see banks such as Al Baraka Bank, for example, increasingly engaging with start-ups globally and are very focused on the fintech agenda. One of them recently joined the board of Bahrain Fintech Bay. We want to continue to work with the existing financial institutions in that space to help them embrace digital disruption and innovation.

Second, were very key to work with Islamic fintechs in different parts of the world and invite them to come to Bahrain and test their products and services here. We were delighted to welcome into our sandbox for example Wahed Invest, which is a Shariah-compliant robo-advisory firm.

The third area, in which I believe there is a lot of potential, is to what extent can we engage with companies doing interesting things in the conventional space which have the potential to develop a Shariah-compliant version of that product?

We worked with Rain in Bahrain, who were the first graduates from our regulatory sandbox, and were the first platform to become licensed for crypto trading in the country. They have now developed a Shariah-compliant focus in their product. Were starting to see companies that are looking at the Muslim market and the Islamic fintech space as an opportunity. I think thats where it gets really exciting from a fintech perspective

This is an industry you could argue that Bahrain has always been at the forefront of. Bahrain pioneered Islamic finance decades ago, and we think fintech is the next phase of that. The only other location that we look at that we see do some interesting things is Malaysia. Something wed love to do from a Bahrain perspective is see how we could tie in with the relevant authorities in Malaysia, as for us its all about building bridges. Malaysia frequently ranks number one in the world for Islamic finance. We know there are some interesting things going on in Malaysia and the Islamic fintech space. We are in different parts of the worldthey are very much a part of the ASEAN economy, were a part of the Gulf economy. Could we build bridges? That question excites me.

We also are asking what else is going on in Pakistan, Indonesia, parts of Africa, London and Luxembourg, which is also looking at the Islamic finance and fintech space. We are trying to build bridges with those other hubs.

Could you tell me more about what your focus is? My personal brief covers four areas, all of which in some way or another link to Islamic finance and the Islamic financial sector. Im responsible for financial services, so we do a lot of work with both the conventional and the Islamic players in Bahrain. Im responsible for the ICT and start up sector. Were very keen to attract more innovators, more fintechs, into Bahrain. We think the Islamic finance space is something thats really ripe for innovation. If you take blockchain technology for example, if you look at the principles of blockchain its all about transparency that drives trust. Well, isnt that one of the

underlying principles of Islamic finance?

What are some of the challenges in getting traditional institutions to embrace innovation?

I think that the main challenge in terms of getting traditional institutions to embrace innovation is to appreciate both the opportunities and the threats. From an opportunity perspective, obviously its a way in which institutions can become more efficient, drive down costs, and to go back to the point I made earlier, that they can further reinforce the principles behind Islamic finance through technologies like blockchain.

The threat, for me, is that they dont one day find that other players have moved into the financial services space and eating their lunch so to speak. Were seeing now the emergence not just of fintech but techfintechnology companies starting to develop financial platforms and financial services.

I was at an event recently and someone said: people dont need banks. They need banking services. If you think about it, if new players start to come into this space and do things more efficiently and more effectively than banks, and Im thinking technology companies for example, thats a threat. What we dont want to see is institutions in Bahrain that we have high regard for, that are important parts for our financial centre, starting to run into difficulties. We want to encourage a degree of disruption; we want to encourage more innovation. We want to shake things up a little bit. We dont want, however, to lose those long-standing and trusted institutions

T hey are looking at this space very aggressively. Bahrain Islamic Bank, thanks to the leadership of its chief executive Hassan Jarrar, have been leading the way. He and I recently visited Singapore recently attending the Singapore Fintech Festival, and we took the opportunity to visit some of the banks in Singapore to see what they were doing to embrace the digital agenda and what institutions in Bahrain could learn from that. There are opportunities, there are threats, and some are moving quicker than others.

We think the insurance space will start to move as well, and we will see Takaful and ReTakaful companies embrace innovation and digital transformation in the way that the banks have started to do. Its a combination of the financial institutions, the innovators, and to some degree the investment community, but also the regulator.

What part does the Bahrain Central Bank play? One thing were very grateful for in Bahrain is that we have one single super-regulator, the Central Bank of Bahrain, who have shown real leadership. This is not an easy place to be ifyoure a regulator, because you want to embrace innovation but you also want to ensure consumer protection, anti-money laundering and all the things good regulators do.

That creates a problem. How do you get that balance right? How do you get the balance between driving innovation on the one hand and encouraging an environment that is innovation friendly while also ensuring that you have tight regulation and tight controls to protect consumers? The CBB stand up against any other regulator in the world in the way theyve got that balance right.

Right from the outset, they have been driving this agenda. When we introduced crowdfunding regulations in Bahrain, they put in place Shariah-compliant regulations. They put Shariah-compliant crypto regulations with Rain. At each stage, theyve been really very mindful of the Shariah- compliant agenda with all new innovations and regulations

What percentage of Islamic institutions are pushing in innovation?

Its difficult to put a percentage on it because its almost like a conveyer belt. At the beginning, you have complete ignorancebanks who dont appreciate the opportunities or the threats that this digital transformation presents to them. Im not engaged with anyone anymore in the banking space who is still in that stage. Theyre all in what I would describe as stage two which I would describe as curious. They appreciate that this is something that cant be ignored, so theyre looking to learn. They have possibly identified key stuff and are starting to adapt accordingly. Then you have those who are actively engaged in the digital space, and following them are the ones who I would describe as outright pioneers in driving this agenda. Im not going to go on record on which institutions those are, as Id rather leave it for others to judge, but Ive already mention one who has impressed me with vision and leadership in this space and thats Hassan Jarrar from Bahrain Islamic Bank, and some of the initiatives coming out of Al Baraka.

How does the Bahrain Fintech Bay fit in?

It gets exciting for me when we talk about all the different component parts of the ecosystem. We have the Bahrain Fintech Bay which has given us an ecosystem under one roofthe beating heart of conventional and Islamic finance and innovation in one space. When we set it up, we didnt want it to simply be a co-working spacewe wanted it to be an ecosystem. You cant have an ecosystem without the incumbents. Its great that some of the Islamic institutions are founding partners of the Bahrain Fintech Bay who are working with the Bay to contribute to the wider ecosystem. That, in this part of the world, stands Bahrain apart. The different players are working together to push this agenda, to drive the ecosystem and the future growth of the ecosystem through the Bahrain Fintech Bay initiative. The Bahrain Economic Development Board then intervenes to try to make this process go faster, as well. These are the key component parts of our ecosystem.

None of that would stand up if we didnt have the skills and the talent. We have many years, many decades, of strength and talent as a financial centre. Next year we actually are celebrating 100 years of banking in Bahrain, as Standard Chartered set up shop 100 years ago in Bahrain. Were very proud of that. Weve been a pioneer in Islamic finance for 50 years, which is again something were very proud of. When were talking about fintech in terms of skills and talent, in terms of fin we have talent, but in terms of tech thats one area that weve really had to adapt. We dont have a long- standing track record as a country in technology. From many years, we made our revenues in oil, though we didnt have quite as much of it as our neighboring countries of course. Weve always had to diversify which is why we became a financial centre but weve never been a tech hub. In the emergence of Silicon Valley, you wont see much mention of Bahrain. We want to be on the forefront of the fourth industrial revolutionthe internet age. This is driven by the vision of his Royal Highness the Crown Prince who is also the chairman of the EDB, to embrace innovation as the new oil and embrace this digitalised economy.

So how do we address the talent gap?

Weve done a few things. Were starting at grass roots, and weve started to take this into schools and colleges to work with our homegrown universities. Bahrain Polytechnic University and the University of Bahrain have been very active in this space. Weve also reached out internationally to drive this agenda properly. Fintech Bay has partnered with Georgetown University in Washington DC USA to develop the national fintech talent programme, involving individuals not just going through development in Bahrain but taking secondments in other parts of the world using our partnerships in New York, Silicon Valley and Singapore so they can get more closely involved with the things that are developing this space. Hopefully this allows us to point young Bahrainis in the right direction in terms of the skills that theyre going to need to pursue their future career paths in this brave new world of fintech and digital transformation. Thats really exciting as well

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