The inaugural Global Financial Forum (GFF), organised by the Dubai International Financial Centre (DIFC), the leading international financial hub for the Middle East, Africa and South Asia (MEASA), was held today under the patronage of His Highness Sheikh Maktoum bin Rashid Al Maktoum, Deputy Ruler of Dubai and President of DIFC. The event provided a platform for expert-led sessions on geo-economic trends shaping the region as well as technological developments that are geared to take the financial services industry to the next level.
Following DIFC’s announcement of a USD 100 million FinTech-focused fund, the key highlights from the day’s morning sessions, which was held under the theme “Navigating the New Order”, were the following:
Session title: Gulf Finance Goes Global
As the Gulf pivots away from old economy that is state-led and oil-centric to a new economy that is private-led and consumer-centric, Khaled Talhouni, Managing Partner of Wamda Capital, said that “the new oil is the consumer” and that is where there will be the greatest opportunity.
Low oil prices are providing an impetus for Gulf economies to diversify away from the oil industry. Hafez Ghanem, Vice President, MENA, World Bank, said Dubai was a good example of how an oil exporter should diversify, and added that Saudi Arabia, with its Vision 2030, is doing the same. He stressed the need for the private sector to drive most of the economic growth, and private-public-partnership models will be very important in securing that. He added that the privatisation drive will help prop up the capital markets.
Karim El Solh, Co-founder and Chief Executive Officer of Gulf Capital, said the challenge is for capital from the GCC to invest in the region and to attract foreign capital to the region, as it transforms from being state-led to consumer and private sector driven.
Session title: The Islamic Economy: Engine of South-South Investment
Islamic finance has been growing, and although it only represents a very small amount of the total finance world, its appeal is spreading to an increasing number of non-Muslims because the principles underlying Islamic finance are in line with ethical and responsible financing.
One of the main hurdles that has stunted Islamic finance’s growth according to Mohamed Damak, Global Head of Islamic Finance, S&P Global Ratings, is the lack of standardisation, mainly that in some jurisdictions one instrument’s structure is deemed as Shariah compliant while in another it is not. Abdulla Al Awar, Chief Executive Officer, Dubai Islamic Economy Development Centre, said that having a single standard may not be necessary, arguing instead for a harmonisation of standards.
Session title: Financial Reforms in Emerging Markets: Ask the Economist
Dr. Patrick Njoroge, Governor, Central Bank of Kenya, said that early adopters of mobile banking technology in Kenya has helped bring financial services to those who were underbanked; as of 2016 roughly three-quarters of the adult population have access to financial services. Dr. Njoroge added that micro lending and investment in government securities through various platforms, will encourage a culture of saving and investment, ultimately this is positive for the entire economy.
On a global scale, the Governor also said that it would be important to have access to cheaper smart phones, so that the 2 billion people who have no access or limited access to financial technology can be serviced.
Soumya Kanti Ghosh, Chief Economic Advisor, State Bank of India, said that India is on the path to major structural reforms, including demonetisation which will help formalise the unorganised financial sector. Some of the major benefits of those reforms have been financial inclusion, demonetisation, and the empowerment of women.
Fireside chat: The State of Play with Bill Winters
Bill Winters, Chief Executive Officer, Standard Chartered, believes that the underlying economic story in the Gulf is positive. He added that Standard Chartered is investing heavily in the region due to plenty of competitive opportunities.
Across the rest of the MEASA region, Winters said that the growth dynamic is positively changing in Africa; Ghana and South Africa are the two biggest markets in that continent that have recovered remarkably over the past two years. As for China, he believes that the leadership is aware of the size of debt that it has accumulated over the last decade and are taking measures to reduce leverage. He also added that in the medium term, the capital markets will continue to open up to foreign investment. On India, Winters said that the Indian government has set itself on a path of positive growth and recovery.
As for FinTech, Winters said that the biggest spenders are banks; over the last several years upgrading and adopting to new technology makes up roughly 10 percent of banks’ expense base. In the UAE, Standard Chartered processes over 98 percent of their transactions digitally.
Winters believes that commercial banks will be around for a long time, but they will adapt to new innovative products and services.
Session title: Goodbye World, Hello Regions: Regional trade deals and corridors
The nature of trade has changed, and nowhere is seeing this happening as fast as in Asia. Increasingly, supply chains that have been only partially involved in the largest continent in the world now begin and end there. Kevin Sneader, Chairman, Asia, McKinsey, said that globalisation has also entered a new era; the growth of emerging markets and their middle classes will drive consumption and a further shift of the centre of trade towards Middle East, Africa and Asia.
Sneader also said that initiatives such as China’s One Belt, One Road will require more involvement from private sector to ensure long-term sustainable growth.
As for China’s ties with the Middle East, Alicia Garcia Herrero, Chief Economist, Asia Pacific, Natixis, explained that beyond its growing size, the nature of economic relation between the second largest economy in the world and the Middle East has changed substantially in a very short period of time. One of the drivers Herrero noted is China’s push for a gigantic investment in its One Belt, One Road initiative where the Middle East received as much as 24 percent of China’s total investment in those Belt and Road countries.
While, the key highlights from the day’s afternoon sessions, which was held under the theme “Navigating the New Order”, were the following:
Session title: Emerging Markets: Leaders and Laggards
Muyiwa Oni, Regional Head of Equity Research – West Africa, Stanbic IBTC Bank, believes that good corporate governance and political stability are very important in attracting investment and foreign direct investment into Africa. An example of where a stable political policy has translated into positive economic growth was the Ivory Coast. He also believes that Senegal has a positive economic growth story.
The will of governments to offer a good business environment is very important, and that is where leaders are identified, said Houssam Nasrawin, President and Founder of Arab Business Leaders. He said that UAE is a good example of how a stable government will help support sustainable economic growth. He is also bullish on Jordan and Morocco.
Session title: Emerging Markets: Pulling Apart?
Arif Naqvi, Group Chief Executive Officer, The Abraaj Group, believes that the term ‘emerging markets’ is too broad; with two-thirds of growth in the private sector and roughly 75 percent of multi-national’s bottom line coming from those economies the label, “Global Growth Economies” is more fitting.
Naqvi broke down the Global Growth Economies into three main clusters, or three Cs: China, consumer-driven economies and commodity producing economies. He believes that there is scalability in those markets because of the young demographic segments capable of driving massive consumption. This makes them very attractive investment destinations. He also believes that rather than thinking of a country and its risk profile, the focus should be on global cities and their long-term economic potential.
Session title: FinTech in Emerging Markets: Latest Trends and Key Players
With the staggering speed at which financial technology is developing, the proactive involvement of regulators and financial institutions from the start is key, according to the speakers. Walid Hanna Chief Executive Officer of Middle East Venture Partners, said that accelerators such as FinTech Hive at DIFC and similar accelerators in the UAE are very important enablers for the FinTech start-up community. But beyond the UAE, the region is lagging and the ecosystem is very fragmented, although there is enormous potential in the region, both in terms of the talent pool and demand from the end user.
FinTech is complementary to financial inclusion rather than disruptive of existing financial services, said Hisham Ezz Al Arab, Chairman and Managing Director of Commercial International Bank (CIB). He added that the millennial generation are shaping the demand trends for banking and other financial services, so today’s banking will be very different from banking of the future.
Heather Henyon, Founder, Women’s Angel Investor Network, said that much of the innovation in FinTech is being driven by start-ups; however, to be successful they require massive amounts of capital, which is where venture capital comes in, as well as access to customers and use cases, which is where the banks come in.
Session title: Banking on Blockchain
Although blockchain is still in its early stages and has many years before going mainstream, it is a very promising technology across various industries, according to the speakers. Leanne Kemp, Chief Executive Officer, Everledger said that banks can benefit from the immutable track and trace application of blockchain, which helps enhance trust and security.
Brian Behlendorf, Executive Director, Hyperledger, explains that there are two different types of blockchain: permissioned and permission-less blockchain. A permissioned blockchain restricts the actors who can contribute to the consensus of the system state. Each member of the network has access rights so that confidential information is shared on a need to know basis. Only a restricted set of users have the rights to validate the block transactions. Behlendorf believes that the potential benefits of the permissioned blockchain makes it attractive to financial institutions and other enterprises.
Asheesh Birla, Vice President, Product, Ripple, said currently there are multiple blockchain networks but there needs to be a platform to house them into one experience. This is being done through Inter-Ledger Protocol (ILP), which, as Birla explains, will do for ledgers and blockchain networks what Hyper Text Transport Protocol (HTTP) did for the Internet.
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Hajar Al Ketbi
Vice President - Corporate Communications & Public Relations