MANAMA - Three leading Bahrain-based financial institutions have come together to create the world’s first fintech consortium to develop Sharia-compliant banking solutions.
Called Algo Bahrain, the consortium includes industry majors such as Al Baraka Banking Group (ABG), Kuwait Finance House-Bahrain (KFH-B) and Bahrain Development Bank (BDB) as founding members.
The consortium was announced during a Press conference held on the sidelines of the World Islamic Banking Conference (WIBC 2017) at ART Rotana Amwaj Islands yesterday.
Eight more banks are expected to join the consortium in phase 2, said Ashar Nazim, who will be working as an adviser at Algo.
Through a collaborative approach, Algo Bahrain will enable Islamic banks to research, innovate and operationalise fintech solutions in a cost-effective and accelerated way promoting financial inclusion, creating new employment opportunities and channelling fresh investment to critical economic sectors.
It will aim to roll out 15 fintech platforms within five years and the first one will be a person-to-business crowdfunding platform for small and medium enterprises, added Mr Nazim.
The Central Bank of Bahrain has already issued regulations for the crowdfunding businesses in anticipation of the changes to the industry.
“Algo Bahrain is a strategic initiative to position Islamic banks for the forthcoming paradigm shift in the banking industry as a consequence of financial technology innovations,” said ABG president and chief executive Adnan Ahmed Yousif.
Explaining the thought behind the venture, KFH-B managing director and chief executive Abdulhakeem Alkhayyat said the combined strength of the founding banks’ market access, customer base and financial resources will enable innovation for social impact.
“The real potential of the Islamic banking industry is easily three to four times more than where we stand today. With innovative business models and new revenue and cost structures, the industry should be eyeing an asset base of $9 trillion within five years, compared with the current $2trn. Anything short would be failing our customers and Algo will be a catalyst on this journey,” added Mr Alkhayyat.
The consortium will have complete strategic, operational and financial independence to innovate financial solutions that are suited for the digital economic ecosystem.
The Algo model will bring down the cost of innovation for member banks while accelerating their speed to market. This will have a direct impact on improving profitability and growth of the banks.
BDB Group chief executive Sattam Algossaibi said he saw the initiative leveraging Bahrain’s status as an Islamic finance hub and its fintech ambitions to drive innovative solutions and financial services to the start-up and SME ecosystem.
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