The ultimate guide for legacy banks in the Middle East and Northern Africa. Find out how to compete or collaborate with fintechs in order to maintain your valuable SME and retail customers.
The Middle East and Northern Africa (MENA) is an exciting region of growth and innovation. Internet penetration has grown steadily over the past few years thanks to increasing investment by internet service providers. Recently, the coronavirus pandemic has accelerated this trend even more, with people in the area viewing smartphones and reliable connections as a necessity. Currently, the Middle East’s internet penetration is among the highest in the world; Oman 92%, Morocco 70%, Qatar 99%, Turkey 74%, Jordan 67%, UAE 99%, Saudi Arabia 93%.
In addition, GSMA, the global mobile network operator organization, estimates that the Middle East and Northern Africa will witness the fastest mobile subscriber growth rate across the globe after Sub-Saharan Africa - growing to 459 million unique mobile subscribers by 2025, from 382 million in 2018. According to the World Bank, the mobile phone penetration in the Middle East is 75% in Qatar, 73% in the UAE, and 60% in Saudi Arabia.
Gulf SMEs boom post coronavirus
Since the beginning of time, the MENA region has been known for craft, entrepreneurship, and trade. Thousands of years later, the history of business remains deeply embedded in the region. Just 3 years ago, it was estimated that the small and medium enterprises (SMEs) sector in MENA is worth around $1 trillion per year.
Countries have rapidly responded with more legal and financial incentives to boost this sector, such as a higher number of bank loans with more favourable payment terms. Previously, SMEs encountered several obstacles due to limited access to credit and funding as traditional financial institutions required strong credit scores. But after fintechs started connecting small business owners with transformative tech and investors, this sector was upscaled.
Even though Covid-19 impacted the profits and funding of small businesses, it did not stop the development. Commercial registrations have seen triple-digit increases in recent months, with tender boards across the region awarding tens of millions of dollars in contracts to enterprises. Currently, 96% of the registered companies in the MENA region are SMEs. Analysts are now hailing the post coronavirus economy as an ‘era of start-up growth’ as governments focus on rebuilding their economies following months of reduced activity during the pandemic. It is expected more incentives to encourage financial institutions to lend to SMEs will follow, which makes many wonder if SMEs are the new gold rush for banks and financial institutions in MENA.
Today’s SMEs are international as standard. They buy supplies from one country, manufacture in another, and sell to many others. They are growing and will continue to grow further, which provides a fantastic opportunity for banks offering cross-border payment services.