Globalization of Finance and Fintech in The MENA Region

Globalization, together with Fintech – in other words, the application of technology to finance – are in the process of revolutionizing the financial services industry. This paper looks at this process in the MENA region and focuses on two sets of countries. The first set comprises the high-income countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. The second group consists of the middle-income countries of Algeria, Egypt, Iraq, Jordan, Lebanon, Morocco, and Tunisia. Countries can benefit from fintech to differing degrees in terms of the financial inclusion of both households and firms, especially small- and medium-sized enterprises (SMEs). Advances in credit scoring, digital banking, and peer-to-peer lending have the potential to transform banking if properly implemented. Distributed ledger, blockchain, and cryptocurrency technologies have enabled Initial Coin Offerings (ICOs). These can greatly improve the number of start-ups and their subsequent growth. They also enable Central Bank Digital Currencies (CBDCs) that may significantly improve central banks’ effectiveness of intervening in the financial system and economy. Finally, appropriate cybersecurity and financial regulation are needed to ensure that fintech can achieve these improvements. Policymakers should be accommodative towards fintech innovations to obtain their full potential benefit.