The Persian Gulf island country of Bahrain is one of the smallest states in the world—about the size of New York City1—but its wealth and innovation have made international headlines. The Global Fintech Ecosystem Report 2020, developed by Startup Genome, notes that Bahrain’s fintech ecosystem is one to watch. Bahrain’s 0% corporate and personal tax rates, wage subsidies, fintech regulatory sandbox, low capital startup requirements for certain businesses and a USD $100 million fund towards “unquoted tech companies” have made the kingdom an attractive market for fintech companies. The Gulf Cooperation Council (GCC) state is now home to over 90 fintechs, a 35% increase from 20182. Over 53 million virtual payments were made in the first half of 2021, and in 2020, Bahrain’s national digital wallet—BenefitPay—saw a 785% increase in remittances through its Fawri+ online payment service.3
Bahrain’s economic resilience amidst the COVID-19 pandemic has also contributed to its emerging status as a fintech-friendly hub. A USD $11.4 billion stimulus package helped to alleviate economic stress on businesses and individuals4, and a June 2021 royal decree extended many of its initiatives, with an extra USD $1.2 billion.5 Economic development agency OCO Global ranked Bahrain’s Economic Development Board (EDB) #6 in the world for its response to the health crisis, and #2 in the technology sub-index for its tech-driven initiatives to promote investment.6 Although the pandemic and a dip in oil prices drove a 5.4% contraction in Bahrain’s 2020 GDP,7 the economy is forecast to grow by 3.1% in both 2021 and 2022.8
Bahrain’s 2021 digital agenda focuses on eKYC, artificial intelligence, a cross-border digital currency pilot and support for fintech and digitalization. The private sector has also been spearheading ambitious initiatives to promote R&D and education in artificial intelligence.9 As the kingdom rapidly evolves, regulators must harness digitalization in supporting financial inclusion for Bahrain’s large population of migrant workers.
Financial Regulatory Authorities
The Central Bank of Bahrain (CBB) is the country’s central bank and primary monetary authority.
The Bahrain Economic Development Board (EDB) is a government agency that seeks to promote economic growth through investment.
The Ministry of Justice, Islamic Affairs and Endowments serves as the Personal Data Protection Authority per the Personal Data Protection Law (PDPL).
Policy, Laws and Regulations
Cross-Border Digital Currency Pilot, 14 May 2021
The central bank partnered with the Arab Banking Corporation (Bank ABC) and JP Morgan to trial the transfer of funds in and out of Bahrain, with the use of digital dollars. The project, which will utilize JP Morgan’s blockchain platform Onyx, seeks to speed up payments and settlements and address other inefficiencies in cross-border transfers. The central bank might look towards an eventual central bank digital currency (CBDC) trial.10
Bahrain Supernova Fintech Challenge, April 2021
The central bank announced the Bahrain Supernova Fintech Challenge, which will give fintech startups access to the bank’s digital lab to develop proofs of concept. Within the digital lab, fintechs will have access to an API sandbox, along with 330 APIs and simulated data sets from participating banks. Top themes include autonomous finance, user experience, artificial intelligence and regtech.11 The central bank has been eager to promote fintech and innovative technologies, and its Fintech and Innovation Unit launched a fintech regulatory sandbox in June 2017.
Launch of eKYC, 30 January 2021
The central bank announced the successful launch of the national eKYC platform. According to the bank’s press release, “The platform provides a national digital identity database for financial institutions to securely verify the identities of their customers, validate their information and share data digitally before providing products and services. This includes retrieval of customer data from governmental entities including [the eGovernment Authority]. BENEFIT has also developed the Application Programming Interface (‘API’) for the platform, which allows for seamless integration with financial institutions’ core systems, digital channels and mobile apps. With the introduction of Open Banking in Bahrain, this also provides an opportunity for fintech companies to verify customers’ identities through their online and mobile applications.”12
1. “Bahrain.” WorldData. https://www.worlddata.info/asia/bahrain/index.php.
2. “The Global Fintech Ecosystem Report 2020.” Startup Genome, 24 November 2020. https://startupgenome.com/reports/global-fintech-ecosystem-report-2020.
3. Faridi, Omar. “Cashless Transactions Increase to $3.62B in Bahrain During H1 2021: Report.” Crowdfund Insider, 13 September 2021. https://www.crowdfundinsider.com/2021/09/180243-cashless-transactions-increase-to-3-62b-in-bahrain-during-h1-2021-report/.
4. “Bahrain Coronavirus Updates.” Economic Development Board Bahrain. https://www.bahrainedb.com/key-updates-on-covid-19/.
5. “Bahrain unveils $1.2bn stimulus package for Covid-hit sectors.” Trade Arabia, 15 June 2021. http://www.tradearabia.com/news/IND_383545.html.
6. “Bahrain EDB recognised globally for its resilience in navigating the pandemic.” Bahrain News Agency, 14 July 2021. https://www.bna.bh/en/news?cms=q8FmFJgiscL2fwIzON1%2BDrxuF42WsvZ8vX2vV0B9u08%3D.
7. “Kingdom of Bahrain.” International Monetary Fund, April 2021. https://www.imf.org/en/Countries/BHR.
8. Abu Omar, Abeer. “Bahrain’s Economy Set to Grow 3.1% This Year And Next.” Bloomberg, 04 July 2021. https://www.bloomberg.com/news/articles/2021-07-04/bahrain-s-economy-set-to-grow-3-1-this-year-and-next.
9. “Deal signed in Bahrain to boost research and development in AI.” ZAWYA, 15 September 2021. https://www.zawya.com/mena/en/business/story/Deal_signed_in_Bahrain_to_boost_research_and_development_in_AI-SNG_243216635/.
10. “Central Bank of Bahrain taps JPMorgan Onyx for digital currency trials.” Finextra, 14 May 2021.
11. “Bahrain Launches Fintech Innovation Challenge: The Bahrain Supernova.” The Fintech Times, 01 May 2021. https://thefintechtimes.com/bahrain-launches-fintech-innovation-challenge-supernova/.
12. “CBB announces launch of eKYC as part of digital transformation strategy.” Central Bank of Bahrain, 30 January 2021. https://www.cbb.gov.bh/media-center/cbb-announces-launch-of-ekyc-as-part-of-digital-transformation-strategy/.
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Last updated: November 2021