The aim of most financial regulators and international financial centres around the world is to support economic growth, provide financial stability, instil market confidence, and maintain trust and integrity to enable a robust environment for financial services to be conducted.
At Abu Dhabi Global Market (ADGM), we have taken a much broader view of our mandate. In upholding high standards and creating a best-in-class regulatory framework, aim is to develop a world-class ecosystem to support the development of a dynamic and vibrant financial sector to support the economy. This goes beyond rules and regulations.
In the two years since ADGM was set up, we’ve gained industry recognition as one of the leading and most innovative financial centres in the Middle East and North African region with high regulatory standards and a market-friendly approach. A centre known for advocating innovation and nurturing entrepreneurship. Our aim is to become one of the world’s leading international financial centres alongside the likes of Hong Kong, London, New York, Shanghai, Singapore etc.
We believe today’s regulators should provide a supportive environment for innovators to contribute meaningfully when financial markets are undergoing huge technological change. Our commitment to doing so has brought trust and fostered further innovation. This is our competitive advantage and has allowed us to grow as a robust and conducive marketplace and financial centre serving the immediate needs of Abu Dhabi, the wider region and globally.
A sound and robust financial services sector is not only an engine of growth, but supports growth more widely among the different sectors of the real economy. It brings about efficient allocation of capital, spreads risk, and enables innovation to support consumption, growth, and production in the real economy.
As a broad-based international financial centre, ADGM’s remit covers the whole non-financial and financial sectors including banking, insurance investments, funds, securities/derivatives, commodities, aviation financing, corporate and legal services, hospitality, fintech and more. This reach enables ADGM to have a holistic overview of the marketplace and gives us a strategic advantage in providing an attractive business and financial ecosystem that caters to multiple industries and markets.
ADGM’s financial and tech focus is strategic and necessary because we want to play a role in supporting a rapid financial transformation in the MENA region. Some 86 per cent of the adult population in this region remains unbanked; local small and medium sized enterprises (SMEs) are a much underserved market receiving 50 per cent less bank lending than the middle income countries’ average. Those are huge funding gaps that fintechs can help plug.
To this end we launched the region’s first fintech regulatory framework in November 2016 to license fintech stakeholders and the first dedicated Regulatory Laboratory (Reglab) – a regulatory sandbox – for fintech innovators to develop and test their products and services in a controlled and supportive environment. Soon, the ADGM Innovation Centre will also be available for the fintech communities, a place where they can gather and create an interactive, collaborative and vibrant ecosystem for innovation to take root in Abu Dhabi and the region.
The ADGM RegLab is one of the most active global fintech programmes in the world. Sixteen international firms cover a wide range of financial verticals including data analytics for credit assessments and biometrics to promote financial inclusion among the SMEs and unbanked, RegTech such as AI-enabled compliance monitoring, blockchain-enabled payments, ICO-based funding platforms and robo-advisory.
In building out the fintech ecosystem, we also work closely with key stakeholders such global regulators, financial institutions and industry partners to address the needs of the sector. For example, we have just launched an electronic know-your-customer (e-KYC) project, working with some of the biggest local financial institutions to develop a proof of concept to determine the governance framework and function requirements of an e-KYC, with the aim of helping reduce a costly burden for banks.
Another collaboration is with Temenos – which provides a fully working version of its core banking platform in the cloud to support the ADGM RegLab firms in developing and testing their solutions. It offers a real-life, but not live, environment that allows the firms to adapt their solutions to meet regulations. Once fully tested and compliant, these solutions can be plugged straight into banks that are running Temenos software. In addition, we support and host Temenos’s annual Innovation Jam for the Middle East in ADGM premise.
Our commitment and efforts in transforming and accelerating the financial landscape in the MENA region have gained industry support and endorsements. Recently, ADGM was accorded Global Investor’s Financial Centre of the Year (MENA) for the second consecutive year; and in early 2017, Abu Dhabi and ADGM were named the top fintech hub for the MENA region by both Deloitte and the Global Fintech Hubs Federation.
However, the journey has only just begun. ADGM will continue to introduce more innovative initiatives and work with partners to serve the evolving needs of the financial industry, as well as, support the development and growth of the finech community in Abu Dhabi and regionally. The best is yet to come.
Richard Teng is chief executive of the Financial Services Regulatory Authority of ADGM