MEA Finance - November 2021

November 2021

Together in Strength Olivier Crespin Chief Executive Officer, Zand

November 2021

Together in Strength Olivier Crespin, Chief Executive Officer, Zand

14 Structured Finance | 20 Roundtable Event | 36 Islamic Finance | 42 Healthcare Finance | 48 Banking Technology

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In this issue...

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elcome to the November 2021 issue of MEA Finance, edging us closer to the start of new year into which we hope that the general background of measured optimism and improving market conditions will carry over and grow in strength.

Strength is a leading theme in our cover story, featuring an interview with the Olivier Crespin, the CEO and co-founder of Zand digital bank.

In the interview he explains that the concept of strength arising from the combination of individual parts forms a key approach to business, encapsulated in their name and operational philosophy, “We want to bring ecosystems together, we want to bring different people with different skills together to address different needs”.

Continuing the assertion that the united can be greater than the sum of its parts, we look at Structured Finance and Syndication from page 14, highlighting it as an important source of capital for regional businesses, “There is clearly a higher demand for funds post pandemic”.

Also in this issue, from page 20, we bring together a strong group of leading bankers and regulators, with coverage of our recent roundtable, Riding the Neo Banking Wave in the Middle East, hosted by Mambu, where a very enthusiastic and absorbing debate on the prospects for neo-banking in the region was had, and what would be the quote of the month, if we had such a thing, was uttered, “Culture eats strategy for breakfast”, courtesy of Sonny Zulu, MD of Retail Banking, Standard Chartered Bank, UAE. Elsewhere, our Market Focus this month is on Egypt where, following the Egyptian government’s fiscal reform measures, growth has accelerated and is expected to rebound strongly in 2022, and in our Islamic finance piece, from page 36, we look at what is driving the growth of Islamic banking assets in the Middle East and how the current environment has brought opportunities to unlock its’ potential. Healthcare is a sector in which the regions’ capital markets will be taking a greater role, as discussed from page 42, and following on from that, we turn to the US real estate market and the reasons behind the investment opportunities in their housing sector.

In our Banking Technology section, from page 48, Swift, the global payments people, makes the case that there has never been a better time to digitise trade and Infosys speaks about eight new business model archetypes that are becoming mainstream in the banking industry. Following on, in our Opinion Pieces, from page 54, DDCAP offer clarity on considerations and actions when divesting from heavy emitting sectors and Sitecore debate what the right tools for success are in this new era of digital banking.

Finally, not forgetting our market news brief at the start of this issue, we hope you will enjoy the coming together of this month’s contributors and interviewees and feel the strength of their wish to provide you with a rewarding use of the time you have set aside to read our latest issue.

mea-finance.com

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CONTENTS

CONTENTS 32

MARKET NEWS

6

Saudi Arabia signs Memorandum of Understanding with HSBC in sustainable investment drive

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GFH Financial Group enters strategic partnership with Schroders Capital to boost footprint across Europe and the Americas

MARKET FOCUS

10

The merits of fiscal discipline: Egypt

STRUCTURED FINANCE & SYNDICATION

14 17 18

Structures and Syndicates Structures in a changing landscape New Foundations for Structures

ROUNDTABLE EVENT

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Neo Horizons

ISLAMIC FINANCE

36 40

A window of opportunity in Islamic finance Investments following Shariah principles present a bright future for Middle East economies

HEALTHCARE FINANCE

42 MEA Finance WEB: www.mea-finance.com EMAIL: info@mea-finance.com PUBLISHED BY: Creative Middle East Media FZ LLE, 19th Floor, Creative Tower, Fujairah Creative City, PO Box 4422, Fujairah, UAE EXECUTIVE DIRECTOR AND PUBLISHER : Kenneth Mitchen Email: ken.mitchen@mea-finance.com

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Banking and Finance news in the MEA market

A Healthy Prognosis

REAL ESTATE INVESTMENTS

46

A new approach to the new U.S. Housing Reality

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8

BANKING TECHNOLOGY

48

Reimagining banking with new digital business model archetypes

51

Digitising trade to unlock economic growth

OPINION

54

The Path from COP26 – Facilitating the Transition

56

Middle East Banks Double Down on Digital Customer Experiences PostPandemic

20

LIFESTYLE

58

Jacob & Co. unveils first-ever minute repeater in sapphire crystal case

46

36 42 48

54 58 mea-finance.com

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MARKET NEWS

Saudi Arabia signs Memorandum of Understanding with HSBC in sustainable investment drive The signing of the MOU Future Investment Initiative conference in Riyadh will identify sustainable investments in the Kingdom for investors and with the power of HSBC’s international network, source global private sector investment and help realize the ambitions of Vision 2030, recently underpinned in the National Investment Strategy and the Saudi Green Initiative Noel Quinn Group CEO, HSBC

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he Ministry of Investment of the Kingdom of Saudi Arabia has signed a Memorandum of Understanding (“MoU”) with the HSBC Group to identify and promote sustainable investment opportunities for the Kingdom.

The MoU, signed at the Future Investment Initiative conference in Riyadh, covers identification and promotion of sustainable investments in the Kingdom for domestic and international investors; identification of sustainable investments overseas for leading Saudi Arabian companies; and supporting public and private sector entities in climate transition and the broad Environmental, Social and Governance (ESG) agenda.

The Minister of Investment, His Excellency Khalid Al-Falih, said: “I welcome today’s agreement, which is further proof that the Kingdom’s ambitions to become a global sustainable investment destination is on track. This agreement is leveraging on the long-standing historical relationship

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between the Kingdom and HSBC and will help us unlock the tremendous Green investment opportunities in Saudi Arabia.

Through the vast network of a global player like HSBC we want to attract global private sector capital into the Kingdom, and realize the ambitions of Vision 2030, as they have been recently underpinned in the National Investment Strategy and the Saudi Green Initiative”.

HSBC Group CEO, Noel Quinn said: “HSBC is committed to helping lead the transition to net zero and this Memorandum of Understanding is another important step in meeting that goal. This collaboration will see us promote sustainable investment opportunities and investment initiatives in the Kingdom to our clients and support leading Saudi Arabian companies to access opportunities with global strategic and financial investors, especially Asian investors.”

T h e M o U , w h i c h i s ef fe c t i ve immediately, envisages the creation of an eco-system of partners in the areas

Banking and Finance news in the MEA market

of sustainability and ESG that would exchange information and ideas on sustainable and ESG investment issues and, subject to relevant regulatory requirements, potential investment opportunities in the Kingdom.

HSBC globally is prioritising financing and investment that supports the transition to a net zero global economy.

The bank has committed to align its financed emissions – the carbon emissions of its portfolio of customers – to the Paris Agreement goal to achieve net zero by 2050 or sooner. To support customers in their transition to lower carbon emissions, HSBC aims to provide up to US$1 trillion of financing and investment globally by 2030. The bank also aims to be net zero in its operations and supply chain by 2030.

In 2020 and 2021, HSBC was named the World’s Best Bank for Sustainable Finance

by Euromoney and the Middle East’s Best Bank for Sustainable Finance, reflecting the strategic importance of sustainability to the bank and its customers.

MARKET NEWS

GFH Financial Group enters strategic partnership with Schroders Capital to boost footprint across Europe and the Americas The partnership with Schroders Capital, which has already undertaken one key co-investment, will greatly add to GFH’s private equity investments platform and provide access to attractive opportunities in Europe and the Americas

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FH Financial Group announced that it has entered into a strategic partnership with Schroders Capital, which has US$70 billion of assets under management and is the private markets investment division of Schroders, the global asset management group with US$968 billion of assets on behalf of its clients. As part of this strategic partnership, GFH will work with Schroders Capital to invest in select private equity and venture capital deals on a discretionary basis.

The partnership will significantly strengthen GFH’s global private equity investments platform with access to attractive buyout and growth companies in Europe and the Americas. Under the strategic arrangement, GFH will invest in select investments alongside Schroders Capital across a range of defensive and downturn resistant sectors such as healthcare, education, technology and consumer.

One of the key co-investments already undertaken is in a global healthcare

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education provider, which has clear leadership positions across several European countries as well as in Latin America. The company, which has a large network of 35,000 students across 10 countries with 140 sites worldwide, has implemented strong digital capabilities and is solidly profitable with tremendous growth potential.

Commenting, Hammad Younis, CIO of GFH, said, “This strategic partnership with Schroders Capital strongly aligns with GFH’s vision of building a robust European and American private equity investment platform, an area where we continue to focus and expand both organically as well as inorganically through partnerships, JVs and acquisitions of GP stakes. We believe Schroders is the right partner for us given their market leading position and strong track record across private market strategies, particularly high growth segments such as healthcare and tech.”

Hammad Younis added, “Consistent with GFH’s philosophy of investing in resilient, ESG impact sectors, we’re also pleased to sign our first co-investment

Banking and Finance news in the MEA market

Hammad Younas CIO, GFH Financial Group

with Schroders in the healthcare space.

We’ve long identified healthcare as an important strategic area for growth and we believe that Covid has been a catalyst to further capital allocation to the sector in order to build a safe and sustainable world.”

Rainer Ender, Head of Private Equity, Schroders Capital, said, “We are pleased to work with GFH on attractive private equity and venture capital investment opportunities and are looking forward to collaborating on further investments.

The investment opportunities remain extensive and I am sure that by working together we can take advantage of some exciting private equity and venture capital deals. We are already looking forward to giving GFH the opportunity to benefit from attractive buyout and growth companies in Europe and the Americas.”

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MARKET FOCUS

The merits of fiscal discipline: Egypt The Egyptian government’s fiscal reform measures were critical in stabilizing the economy—growth has accelerated and current account and fiscal deficits have narrowed

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hough the impact of the COVID19 pandemic on Egypt’s tourism sector and the week-long blockade of the Suez Canal by Ever Given derailed the country’s growth prospects, the World Bank projected that the economy will expand by 2.3% in 2021.

Egypt partly managed to contain the economic impact of coronavirus as growth continues even as the pandemic has battered oil-rich nations across the Arab world. Tourism and the Suez Canal are the North African country’s two main sources of foreign currency.

By mid-2016, Egypt’s economy was teetering on the edge as investors shunned the Arab world’s most populous nation but

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now it is being hailed by investors as one of the region’s fastest-growing economies.

“Egypt’s macroeconomic reforms of recent years helped stabilize the economy, allowing the country to enter the pandemic with a level of economic stability that somewhat cushioned the blow of the COVID-19 crisis,” said the World Bank.

An unsustainable policy mix had left Egypt facing low growth, elevated and rising public debt, and a mounting balance of payments problem with severe shortages of foreign exchange as well as an overvalued exchange rate. However, Egypt managed to reduce its debt by 20% in the past three years despite the double whammy of COVID-19 and low oil prices.

Banking and Finance news in the MEA market

The Egyptian government’s fiscal reform measures were critical in stabilizing the economy—growth has accelerated and current account and fiscal deficits have narrowed. The country reported real GDP growth of 3.3% in the fiscal year that ended in June 2021 and is targeting 5.5% for the current year, according to the Ministry of Finance.

The North African nation’s foreign currency reserves have risen while public debt, inflation and unemployment have significantly declined. Meanwhile, the ratio of the debt-to-gross domestic product remains manageable, partly because the economy is growing relatively fast.

S&P Global said that Egypt has sufficient buffers to guard against market pressures due to the country’s maintained sizable foreign exchange reserves of about $41 billion as of end-July 2021, though lower than the $45 billion it held before the outbreak of the pandemic.

Fiscally fit Egypt’s economic reform program implemented a significant policy adjustment that was anchored by the

with a crippling debt-service burden that’s one of the heaviest among all sovereigns.

“Growth is expected to reach 2.8% in 2020/21 and rebound strongly to 5.2% in 2021/22, but the outlook remains clouded by uncertainty while Egypt remains vulnerable to shocks due to its high public debt and gross financing needs,” the IMF said in June 2021.

Egyptian lawmakers in June approved a $158 billion (EGP 2.46 trillion) budget for the financial year that commenced July 1, 2021, and the government is projecting a budget deficit of 6.6% in the 2021/22 fiscal year. Egypt has been tapping international debt markets to finance the deficit. The finance ministry said in August 2021 that the country will start issuing Islamic bonds in the first

liberalization of the foreign exchange market and fiscal consolidation to ensure public debt sustainability. The structural reforms which were introduced were critical in unlocking billions in International Monetary Fund (IMF) funds and successfully corrected Cairo’s large external and domestic imbalances.

The country received an additional $1.6 billion, which is the final instalment of its $5.2 billion one-year stand-by arrangement, from the IMF in June 2021 as it finalized a financial package program for the North African nation. The $5.2 billion funding aid came two years after Cairo emerged from a three-year IMF program that provided a $12 billion loan to aid the authorities’ unpopular economic reform in July 2019.

The backing from the Washingtonbased fund helped draw in investors attracted by a real interest rate that’s one of the highest among more than 50 major economies, according to Bloomberg, and they pumped billions of dollars into the local debt market. However, S&P Global cautioned earlier in September that Egypt’s reliance on borrowing has left it

their outlooks, citing its strong economic growth prospects following fiscal reforms.

Banking sector Egypt’s domestic banking sector remains very liquid, with high deposit growth off a low base of financial inclusion. There has been a wave of deal-making in the Egyptian financial service sector as banks position themselves for improved economic conditions post-pandemic era. UAE’s First Abu Dhabi Bank said in April that it had begun the share transfer related to the acquisition of 100% of the share capital of the Egyptian unit of Lebanon’s Bank Audi.

Bahrain’s Arab Banking Corporation (ABC) also acquired a 100% stake of Blom Bank Egypt for $427 million. Egyptian

EGYPT’S MACROECONOMIC REFORMS OF RECENT YEARS HELPED STABILIZE THE ECONOMY, ALLOWING THE COUNTRY TO ENTER THE PANDEMIC WITH A LEVEL OF ECONOMIC STABILITY THAT SOMEWHAT CUSHIONED THE BLOW OF THE COVID-19 CRISIS – The World Bank

half of 2022 to plug the fiscal gap and to mobilize funds for its social and economic development projects.

La s t m o n t h , E g y p t ’s m i n i s t r y of finance launched a three-year syndicated loan with green and Islamic finance components with the aim to raise $2 billion. The government plans to use the proceeds of the green financing tranche for sustainable projects while the Islamic tranche will be used to plug the budget deficit.

Egypt’s fiscal discipline was hailed by the three main rating agencies— Fitch Ratings, Moody’s, and S&P Global —who could not help but upgrade the country’s sovereign ratings as well as

investment bank EFG Hermes Holding acquired a 51% stake in state-owned Arab Investment Bank (AIB) in a deal valued at $163 million (EGP 2.55 billion) in May—the country’s first privatization since 2006 when it sold a majority stake in Bank of Alexandria.

Driving growth Founded in 2018, the Sovereign Fund of Egypt is part of the North African country’s broader structural reforms that are aimed at bolstering private investment. The sovereign wealth funds, which is modelled after those in the Gulf region, is aimed at generating additional wealth from under-utilized state assets. mea-finance.com

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Eco-system for Alternatives The continued shift in regulatory demands together with a desire for greater diversity in asset management strategies is adding layers of complexity to cross-border investment – while at the same time, the unprecedented flux caused by the pandemic continues to impact global economies.

As a result, Middle East investors are faced with multiple challenges and it is no surprise that, in times of such uncertainty, they are seeking familiar safe harbours to meet their alternative investment needs.

By An Kelles Director for GCC an.kelles@jerseyfinance.je

Faizal Bhana Director Middle East, Africa and India faizal.bhana@jerseyfinance.je

Jersey has a long history of supporting the private wealth structuring requirements of high-net-worth investors and ultra-high net worth families in the GCC. Its 60 years’ experience in the financial services sector, robust regulatory and legislative regimes, Shariah-compliant offering and 14,000-strong specialist workforce have made it an attractive jurisdiction to work with.

Now, this solid framework is making Jersey a natural choice as those same investors look to meet their alternative fund investment objectives.

Recent figures show that the value of funds business managed through Jersey rose to a record high of US$535bn in 2020, reinforcing Jersey’s appeal as a safe location for institutional capital, as investors have sought resilient, stable, robust, transparent and straightforward fund structuring options to continue to generate returns.

Forward-thinking initiatives like the Jersey Private Fund (JPF), a product offering small numbers of sophisticated investors quick regulatory approval, have added to Jersey’s attraction, especially given their suitability for impact investing and co-investment amongst family offices.

This offering set alongside Jersey’s global distribution capabilities puts the jurisdiction in a strong position to meet Middle Eastern investors’ strategic and global needs.

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FRANCE

With $11.96 billion assets under management, the Sovereign Fund of Egypt is partnering with the private sector to attract domestic and foreign investments as well as build on economic reforms which began in 2016 with the flotation of the currency.

The Egyptian wealth fund was appointed by the country’s ministry of defense to sell part of a portfolio of companies in what would be the country’s first spin-off of companies owned by the military. Earlier this year, the wealth fund was looking for potential buyers of the National Service Projects Organisation’s (NSPO) Wataniya Petroleum—a fuelling station chain group run by the military.

Egypt and the UAE agreed in November 2019 to set up a $20 billion joint investment platform to invest in a range of sectors and assets. The investment platform will be run through the Egyptian wealth fund and Abu Dhabi’s ADQ. Since the creation of the joint venture, ADQ has made significant investments in Egypt including Lulu International’s $1 billion expansion into the Arab world’s most populous country.

PwC said the fund is aimed at helping Egypt better utilize its assets and to attract foreign investments that have, so

EGYPT HAS SUFFICIENT BUFFERS TO GUARD AGAINST MARKET PRESSURES DUE TO THE COUNTRY’S MAINTAINED SIZABLE FOREIGN EXCHANGE RESERVES OF ABOUT $41 BILLION AS OF ENDJULY 2021 – S&P Global

GROWTH IS EXPECTED TO REACH 2.8% IN 2020/21 AND REBOUND STRONGLY TO 5.2% IN 2021/22, BUT THE OUTLOOK REMAINS CLOUDED

BY UNCERTAINTY WHILE EGYPT REMAINS VULNERABLE TO SHOCKS DUE TO ITS HIGH PUBLIC DEBT AND GROSS FINANCING NEEDS – International Monetary Fund

far, been overshadowed by an infusion of overseas cash into the local debt market.

Under the leadership of President Abdel Fattah Al-Sisi, the Egyptian government is accelerating infrastructure development drive that includes a rapid development of the road network and an expansion of the Suez Canal. Egypt signed a $4.45 billion deal for a high-speed electric rail line to link the Red Sea and Mediterranean coasts with a Siemens Mobility-led consortium earlier in September 2021. The deal came months after a $23 billion deal between the German engineering and technology group and Egypt to build a 1,000 km highspeed train network that will link the country’s eastern and northern coasts and major cities.

Egypt is also on track to gradually start the shifting of government employees to the New Administrative Capital, a new city that is being built 45 km east of Cairo, by the end of the year. The new city, whose first phase is valued at around $25 billion, is designed to eventually house 6.5 million people to ease overcrowding in central Cairo.

Tapping Egypt’s vast wealth After offloading a 51% stake in AIB, the Egyptian authorities seek to raise as much as $5.7 billion ( EGP 100 billion) by selling minority stakes in at least 20 stateowned enterprises on the stock market.

The country plans to offer minority stakes in companies including Alexandria Mineral Oils Company, Eastern Tobacco,

Alexandria Container as well as Cargo Handling and Abu Qir Fertilisers and Heliopolis Housing.

State-controlled payments firm e-finance for Digital and Financial Investments said in September 2021 it would offer up to 14.5% of its capital in a public offering on the Egyptian Exchange in the last quarter of this year.

Egypt is leaving no stone unturned in its bid to boost its coffers and lure foreign investors who fled during the 2011 uprising. The government launched a bid round for the exploration and production of oil and natural gas in 24 blocks that are located in the Gulf of Suez, the Western Desert, and the Eastern and Western Mediterranean in February 2021.

The North African country also signed nine new agreements for oil and natural gas exploration with investments above $1 billion earlier in 2021. Under the exploration deal, American energy giants Exxon Mobil and Chevron, France’s Total, Royal Dutch Shell, and South Valley Egyptian Petroleum Holding Company, will drill 17 wells.

Economic growth accelerated to 2.8% in the fiscal year that ended in June 2021 despite the impact of the pandemic on global economic activities, with the projection that it will reach 5.2% in the current fiscal year. Debt and the budget deficit, though still hefty, have been on a downward trend. The deepening and broadening of effective reforms are critical to speed up economic recovery and address unemployment. mea-finance.com

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STRUCTURED FINANCE & SYNDICATION

Structures and Syndicates In gearing up for the post-Covid economy, structured finance and syndicated lending will be an important source of capital for regional businesses, and banks are now looking at leveraging technological solutions such as distributed ledger technology and smart contracts to advance negotiation, execution, administration and trading of loans

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hough the COVID-19 pandemic seems to be subsiding in most structured finance markets g l o b a l l y a n d va c c i n a t i o n programs are currently underway, potential new variants, uneven inoculation rates and further infection waves remain

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a risk. “After a substantial dip in 2020, the run rate of new global structured finance issuance has now fully recovered, with ongoing weakness in covered bond volumes countered by growth in securitization,” S&P Global said in June 2021.

Banking and Finance news in the MEA market

The most important question in the current challenging operating environment is how can banks bridge the gap between borrower demands for better pricing and longer tenor? The slowdown in economic activities due to coronavirus-related restrictions and the uncertainties around the trajectory of the pandemic forced non-financial firms to tap debt markets—and syndicated loan markets—as part of the companies’ broader efforts to secure funds for covering operational expenses and possibly boost their coffers.

According to the Bank for International Settlements (BIS), borrowing by nonfinancial firms in global debt markets surged following the COVID-19 shock and central banks played a pivotal role in accommodating the increase in funding requirements.

Syndicated loans are a significant source of capital in the Middle East.

Regional banking powerhouse such as Saudi National Bank and UAE’s First Abu Dhabi Bank have become more sophisticated and are capable of meeting most of the financing needs of large businesses in the Middle East. Similarly, international banks such as Citigroup

and Dutch lender ING Group are also increasing their presence in the Middle East, as the region is gaining importance within emerging markets.

Borrowers benefit from increased access to capital and lower financial transaction costs than would be achievable through bilateral loans with individual lenders. In the past 24 months, borrowers from different sectors in the region including UAE’s Emirates Global Aluminium (EGA), the Gulf region’s biggest lender Qatar National Bank (QNB) and IGA, the operator of Istanbul’s new airport have secured funds.

Globally, borrowing by large firms in debt markets has outpaced that of midsize firms in the last two years. Moody’s said that at the corporate level, the bulk of new borrowing has been raised by large firms—with revenues above $1 billion—reflecting their better access to the booming bond market.

The COVID-19 outbreak accelerated digitalisation in the financial services sector and banks are increasingly considering leveraging technological solutions such as distributed ledger technology (DLT) and smart contracts for the syndicated loan market. Distributed ledger technology among other smart solutions is expected to advance negotiation, execution, administration and trading of loans—ideally through the adoption of single-platform solutions.

Driving forces The travel and movement restrictions together with border closures that were introduced to curb the spread of the pandemic sparked a surge in corporate defaults globally, although collateralized loan obligation (CLO) managers have been able to mitigate the impact through trading activities.

Fitch Ratings said that most structured finance asset classes continue to perform well, although the rating agency expects an asset performance deterioration in some asset classes as the full scale of the economic fallout due to COVID-19 is still unfolding.

SYNDICATED LOAN MARKET IS ADOPTING TECHNOLOGY STEP BY STEP BY INVESTING IN VARIOUS TECHNOLOGICAL SOLUTIONS WHICH ADDRESS SPECIFIC POINTS IN THE LOAN LIFE CYCLE – Clifford Chance

The rate of delinquencies increased in some asset classes last year, but this measure of stress credit has moderated gradually as governments in the Middle East are considering extending regulatory relief measures that allow banks to maintain lower capital and liquidity buffers beyond the end of 2021 as part of economic stimulus measures—depending on the pace of recovery and loan demand.

However, although several economies in the emerging markets including the Middle East have pledged that they will

MOST STRUCTURED FINANCE ASSET CLASSES CONTINUE TO PERFORM WELL, ALTHOUGH AN ASSET PERFORMANCE DETERIORATION IN SOME ASSET CLASSES IS EXPECTED AS THE FULL SCALE OF THE ECONOMIC FALLOUT DUE TO COVID-19 IS STILL UNFOLDING – Fitch Ratings

not resort to lockdowns, the surge in new coronavirus cases due to emerging variants may cause additional lockdown measures and a prolonged recovery.

BIS said that while large corporates have likely used proceeds from syndicated loans to meet short-term liquidity shortfalls, some indicators suggest that these firms are also building precautionary buffers amid the prolonged pandemic.

Similarly, an increase in the average tenor of issuance shows that large corporates are determined to avoid near-term refinancing needs. “Like in the aftermath of the great financial crisis, large firms may gradually use or decommission these buffers and, thus, better cope with economic uncertainty,” said BIS. The dominance of large corporates in new borrowing reflects their better access to the booming syndicated loan market. However, large corporates’ dominance in bond-based borrowing is expected to push out mid-size companies, which are also creditworthy and may show significant liquidity needs.

Bridging the gap Syndicated loans allow financial institutions to spread the risk of a single customer usually large corporates or governments borrowing a very large amount. Governments and corporates usually seek financing through syndicated loans to fund major projects and the amount in question might be too much for a single bank to provide but a group (syndicate) could offer the loan with ease. mea-finance.com

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STRUCTURED FINANCE & SYNDICATION

“The syndicated loan market could open up to more players if the back-office operations were simpler. As it is now, the pain points are many,” said Deloitte.

The pain points that are associated with the syndicated loan market include the selection of both syndicate members and qualifying borrowers, the underwriting system is not connected to the diligence system and delays and intermediaries adding to the costs.

However, industry experts see DLT’s record-keeping functionality to make it easier, safer and more profitable for financial institutions to participate in a syndicated loan opportunity. According to the British law firm, Clifford Chance, the syndicated loan market is adopting technology step by step by investing in various technological solutions which address specific points in the loan life cycle.

Here’s how digitalization is expected to enhance the syndicated loan market according to Deloitte: Efficiency: Smart contracts could make loan servicing more efficient and provide a more seamless customer experience. “Smart contracts will automatically form syndicates, verify financial information and carry out settlement services, reducing the time to fund a borrower,” said Deloitte.

Cost-cutting: Distributed ledgers and smart contracts will eliminate the need for third-party intermediaries.

Integrated: Diligence systems will communicate pertinent financial information directly to underwriting systems.

Regulation: The system gives regulators a real-time view of financial details throughout the syndicated loan lifecycle.

Security: Operational risks will be eliminated as DLT automatically disburses principal and interest payments.

MENA syndicated loans Syndicated loans in the MENA region picked up significantly after the outbreak

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SYNDICATED LOANS IN THE MENA REGION PICKED UP SIGNIFICANTLY AFTER THE OUTBREAK OF THE PANDEMIC, WITH ISSUANCE VOLUME INCREASING BY ALMOST 150% FROM $8.7 BILLION TO $25.3 BILLION IN THE FIRST QUARTER OF 2021 – Bloomberg

of the pandemic, with issuance volume surging by as much as 150% from $8.7 billion to $25.3 billion in the first quarter of 2021, according to Bloomberg.

EGA, one of the world’s largest aluminium producers, refinanced a $5.5 billion syndicated loan facility in August 2021. The new facility, a senior unsecured loan, reduced by $1 billion the size of EGA’s existing seven-year $6.5 billion loan facility that was obtained in 2019 while adjusting scheduled debt repayments including extending them by

AFTER A SUBSTANTIAL DIP IN 2020, THE RUN RATE OF NEW GLOBAL STRUCTURED FINANCE ISSUANCE HAS NOW FULLY RECOVERED, WITH ONGOING WEAKNESS IN COVERED BOND VOLUMES COUNTERED

BY GROWTH IN SECURITIZATION – S&P Global

Banking and Finance news in the MEA market

two and a half years. Qatari lender, QNB, borrowed $875 million during the same month to refinance existing debt and support general funding requirements.

Bloomberg’s EMEA Capital Markets Tables, which polls the top arrangers, bookrunners and advisors across various deals including syndicated loans, bonds, equity and M&A transactions, shows that HSBC managed to secure first place in the first quarter 2021, after coming in at the second position in Q1 2020 and 2019 in the role of bookrunner. The British lender managed to beat First Abu Dhabi bank under the same role by a margin of nearly $40 million.

The Turkish wealth fund, TWF, secured around $1.5 billion from a syndicate of international banks in March 2021 to roll over a two-year loan from 2019.

In September 2021, Egypt’s Banque Misr concluded its largest syndicated term facility to date with a medium-term $1 billion loan from international debt capital markets to finance projects and contribute to sustainable development.

Dubai’s largest bank, Emirates NBD, said last month that the Egyptian government had launched a three-year syndicated loan with green and Islamic finance components intending to raise $2 billion.

The fundraising exercises come as borrowers in the Middle East seek to improve their financing to reflect better market conditions after last year’s coronavirus-induced economic meltdown.”

STRUCTURED FINANCE & SYNDICATION

Structures in a changing landscape Sebastian Frederiks Head of Wholesale Banking Middle East, ING explains that borrowers are becoming more entrepreneurial with ESG financing boosting demands for syndication, and the most active regional players being Saudi Arabia, the UAE and Oman

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re you noticing greater demand for structured financing as we move further into the postpandemic economic landscape?

There is clearly a higher demand for funds post pandemic. Borrowers have resumed their investment programs and the “maintain the existing investments” approach is being replaced with a more entrepreneurial mode of operations.

The Middle East has been a substantial contributor to the deal volumes in the EMEA region, albeit with a slightly reduced number of deals in the pandemic period as compared to the previous years. The market collectively believes that the greatest opportunities for new deal flow should come from two main areas – refinancing’s and local and international M&A activity.

Which regional business or industry sectors are most likely require structured financing in the near to medium term?

ING has a long, rich history of over 40 years in the Middle East. In our view, the most likely sectors in the Middle East that are expected to require investment and new money would be Oil & Gas, Infrastructure and Utilities. The market also anticipates an increased amount of M&A activity in these sectors. We also expect the Financial

Institutions sector to increase its borrowing activity – predominantly because of the previous 18 months of Covid disruption.

Middle East banks, although safe and stable in their current position, have expressed an intention to improve their “margin of safety” to ensure no surprises may squeeze through the cracks due to financial problems that have been experienced by some of their customers.

Is the regional financial services sector fully equipped to provide for the specialist needs of big business in the Middle East?

It is unlikely that the local lenders will be able to satisfy the increased cash appetites of major Middle East borrowers without the substantial international Financial Institutions assistance. We can only look at the size of some of the latest transactions (PIF 15bn, Aramco 10bn, EGA 5.53bn [albeit a smaller amount than the deal it refinanced], Sadra Chemicals 9.9bn, EIG Perl Holding 11bn). Almost every transaction is oversubscribed, and most are scaled back, which is opportune for the local lenders since as it helps them to remain within the individual borrower limit thresholds. This exceptional liquidity gives rise to what we call “strategic bidding” where banks committing more than they want to hold in anticipation of oversubscriptions

Sebastian Frederiks Head of Wholesale Banking Middle East, ING

and scaleback. This, in turn, leads to an impression of artificially high liquidity.

Do you expect to see a greater call for syndicated loans in the Middle East in the coming five years?

Monetary policy of central banks will be the most significant driver of the syndicated loan market over the next 12 months. For the moment the card has been very opportune for active lenders and, hopefully, this will continue into the next year. However, a lot of this will depend on the state of the European and the American economies (on the lenders’ side) with the signs of accelerating inflation being one factor to watch out for. ESG financing (coupled with LIBOR transition) will provide further boost to the ME demand for syndicated loans. One of our key strengths is offering clients is Sustainable Financing and in the Middle East we have already successfully supported several top-tier clients to transition into a more sustainable business through Green Bonds, Green Private Placements, ESG-linked loans and Sustainable Finance Advisories.

Both in terms of the size and number of deals, which regional markets will see the highest levels of structured finance and syndication action in the coming years?

We believe that the most active and successful borrowers will continue to be those from Saudi Arabia, UAE and Oman.

At the same time, it is possible that Qatar may start catching up with the leaders in an effort to diversify its economy in the next few years. mea-finance.com

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STRUCTURED FINANCE & SYNDICATION

New Foundations for Structures Zain Zaidi Head of CEEMEA Loans and Leveraged Finance at Citi describes the present and expected regional landscape for structured finance and syndication, highlighting some of the key markets and sectors where activity is set to increase including interesting hybrids of real-estate with other collateral, but also pointing out that small and mid-sized businesses may find access to the regional capital markets a little less quick

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re you noticing greater demand for structured financing as we move further into the postpandemic economic landscape?

Middle East markets have reverted to being fairly benign and borrower friendly, however, we do continue to see greater demand for structured finance driven by a few factors: Certain sectors, spaces and countries still haven’t seen appetite revert in the same way and are looking at structured financings to raise funding Some clients are looking to access alternative pools of liquidity in order to either preserve bank market capacity and / or get duration without going to public markets Investors are hungry for yield and if a structured/ bespoke financing offers a pick-up over public securities or plain vanilla syndicated loans, there are an increasing number of investors keen to take on these deals There are more investors willing to go further down the capital structure and consider quasi-equity instruments in search of yield

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Zain Zaidi Head of CEEMEA Loans and Leveraged Finance, Citi

Banking and Finance news in the MEA market

The regional financing market is becoming more mature and sophisticated and there is a greater openness to these structures from all parties

Which regional business or industry sectors are most likely require structured financing in the near to medium term?

We are seeing greater adoption of risk mitigation, insurance cover and d eve l o p m e nt f i n a n c e i n st i t u t i o n involvement in private sector transactions across the region and real-estate remains popular and in need of financing too.

We are also seeing some interesting structures being contemplated for new transactions that mix real estate with other collateral to raise funding. We also notice that early-stage technology companies with more constrained cashflows and therefore with limited access to plain vanilla bank financing, are looking to raise financing via instruments that may have structural enhancement such as equity like features.

Is the regional financial services sector fully equipped to provide for the specialist needs of big business in the Middle East?

Large local and regional banks are becoming increasingly sophisticated and are capable of meeting most of the more complex needs of large businesses in the Middle East. Furthermore, international banks are focused on the Middle East, given its importance within emerging markets, providing large clients access to global expertise. We are expecting very strong borrowing volumes across the loan and bond markets in the region this year and capital is readily available at attractive terms for well-rated borrowers.

Large conglomerates like Majid Al Futtaim have raised bank debt at attractive levels and bond market access for investment grade and cross-over corporates remains available and attractive too. Governments and Government related entities continue to have strong market access, not just

the investment grade countries, but Oman, Bahrain, Egypt have also seen strong appetite.

Where we have seen less speedy recovery post the COVID-19 pandemic, is on small and mid-sized businesses where banks have been slower to go back to lending and the smaller size and scale of these businesses makes it more challenging to access the capital markets. This is due to it being harder to obtain favorable ratings and because the issuance size may not be sufficient to garner public investors’ interest. It is these

for Public Investment Fund, EIG/Aramco, Emirates Global Aluminum and others.

Some of these same trends are expected to continue in the next 5 years, increasing activity out of Saudi Arabia, greater infrastructure financings and bigger acquisition financings. Some Borrowers also prefer to access the private loan market over public debt markets due to concerns over public disclosure.

Additionally, as rates start to increase, the relative attractiveness of fixed rate issuance will reduce as borrowers and issuers may not rush to lock in long-term

THE REGIONAL FINANCING MARKET IS BECOMING MORE MATURE AND SOPHISTICATED AND THERE IS A GREATER OPENNESS TO THESE STRUCTURES FROM ALL PARTIES small and mid-sized businesses where there is the greatest need to borrow using bespoke structures and where a number of discussions are currently taking place.

rates as they have been doing recently.

So, I would expect to see even greater demand for syndicated loans over this time period.

Do you expect to see a greater call for syndicated loans in the Middle East in the coming five years?

Both in terms of the size and number of deals, which regional markets will see the highest levels of structured finance and syndication action in the coming years?

As a starting point, we are at about US$98 billion of syndicated loans in MENA already as per Dealogic and will potentially close the year north of US$120 billion, given everything that is in the pipeline and fairly advanced. This would make it one of the biggest years ever from the region in terms of volumes. What is interesting this year is that Saudi Arabia makes up over 60% of the regional borrowing and this year, for the first time it will be the largest regional borrower, a distinction that had been resting with the UAE so far.

Secondly, these massive volumes are coming on the back of fewer but larger financings. The average deal size this year is over $1.5bn driven by jumbo transactions

Saudi Arabia remains the country that we expect to see the most volumes come from for the next few years. Given the government’s plans to develop infrastructure and diversify its economy, there should be significant financing need.

The UAE remains the deepest market for syndicated deals with plenty of private sector corporate activity, but Saudi Arabia also has great potential on this front too.

Structured financings are harder to predict but a large number are likely to come from these two countries. Egypt also could be quite interesting on this front. mea-finance.com

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ROUNDTABLE EVENT

Neo Horizons A powerful panel of senior banking executive and regulators came together for a roundtable, convened to discuss the growth of Neo Banking across the region. Hosted by Mambu, in partnership with MEA Finance, and covering key themes including culture, payments, technology and the cloud, as well as regulation, the lively and enthusiastic debate covered the rise of these new institutions as well as the numerous factors involved in bringing them into the world

O

n the 6th of October this year, Mambu and MEA Finance hosted a group of senior banking executives and regulators, who came together to debate the growing role of neo banking in the Middle East in a roundtable discussion, entitled “Riding the Neo Banking Wave in the Middle East”.

Germany-based Mambu is a software as a service (SaaS) cloud banking platform that supports fintech startups, and top tier banks to advance their financial experiences across a range of domains from personal lending, business

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lending, mortgages, trade finance, digital wallets and currents accounts. The company has more than 200 customers in over 45 countries and counts many diverse banks such as German neobank N26, British SMEs bank OakNorth, British challenger bank Tandem Bank, South Africa digital bank TymeBank, Dutch bank ABN AMRO and League Data among its clients.

Digital transformation has been a key battleground for banks in regional countries such as the UAE, Bahrain, Saudi Arabia and Israel—a competition that was intensified by the pandemic. Industry

Banking and Finance news in the MEA market

mea-finance.com

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ROUNDTABLE EVENT

experts who attended the roundtable agreed that it is important for financial institutions to understand that they can adapt to the swiftly changing banking landscape.

One of the key highlights from the Mambu and MEAFinance Roundtable is that adopting a digital-first approach creates an opportunity for financial institutions to launch new brands while leveraging the integrity and strength of an incumbent bank to gain a powerful competitive edge over emerging fintechs.

Circumstances are also forcing the situation with pressure from customers and regulations such as the European Union’s revised Payment Services Directive (PSD2) pressuring banks across Europe, the Middle East and Africa (EMEA) into digitisation.

The health crisis created significant challenges for all industries, but it also presented an opportunity for the global financial service sector to accelerate and strengthen the digitalization of complex processes and end-to-end customer journeys across the front, middle and back offices, a trend that was already in full throttle across the region.

The discussion was led by Miljan Stamenkovic, General Manager, MENA at Mambu who stressed that neobanks or challenger banks are here to stay because “maintaining the status quo is just not enough in the current operating environment in which the economic impact of the pandemic is still pressuring the bottom line of banks coupled with the changes in the regulatory landscape.”

Stamenkovic was being supported by guest speaker Neale Croutear-Foy, CTO, Digital Banking, APEX Group, who also highlighted that his organisation managed to create a fully digitized banking solution with full digital banking capabilities and onboarding from scratch over the last 16 months using Mambu as its core banking solution.

The roundtable was an opportunity for bankers and regulators in attendance to give their perspective on neo banking and how regional financial institutions

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can enhance banking with a particular interest in the growth prospects in the region, augmenting user experience (UX) and personalization of products as well as adapting and linking them using cloud Application programming interfaces (APIs).

CULTURE EATS STRATEGY FOR BREAKFAST – Sonny Zulu Managing Director, Retail Banking, Standard Chartered Bank UAE

The rise of neo banks Digital transformation in the financial services sector is swiftly changing the field of play where incumbent banks are facing increasing competition from nontraditional entrants who are latching on to customer experience as their point of sale. For several banks in the Middle East, business is no longer

Banking and Finance news in the MEA market

about the products and services on offer but about enhancing user experience.

Indeed, coming from KPMG, “Digital transformation is no longer a luxury, but a necessity. Banks that are agile, flexible, and willing to transform their business models will be the ones that succeed, and secure their financial strength for future growth,” Amit Malhotra, General Manager, Personal Banking Group, Commercial Bank of Dubai, provided an analogy of a speedboat, representing a neo-bank, and a bigger ship, the legacy bank.

He said that in 2016 the Dubai-based lender launched a digital bank called CBD Now and the bank management, “adopted a strategy of building the speedboat while keeping a bigger ship floating. The bank soon realized that the speedboat was appealing, the speedboat is very good, but it did not have the capacity required. So, we fitted the engine of the speedboat on the bigger ship, and we started converting our bigger ship to become closer to a speedboat, but with the capacity to carry the passengers and the journey over the last two and half years for us has been a combination the two,” he concluded.

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ROUNDTABLE EVENT

Mashreq Bank and Emirates NBD launched digital-exclusive banks for SMEs, NeoBiz and E20 respectively, in September 2019. The unveiling of digital banks for SMEs came exactly two years after both Mashreq Bank and NBD had launched Mashreq Neo and Liv., lifestyle digital-only banks that seek to meet the banking needs of millennials. The country ’s first independent digital banking platform, YAP, started operations in August 2021 and it is powered by RAK Bank. Abu Dhabi sovereign wealth fund ADQ is also considering setting up a digital bank using a legacy banking license of First Abu Dhabi Bank, reflecting the

UAE’s positive regulatory underpinning for the starting and operations of neo-banks.

While giving an example of his experience at Singapore’s DBS, Olivier Crespin, co-founder & CEO of Zand, said that when a financial institution builds a digital bank on top of its existing legacy bank, it usually works better in an operating environment where the bank does not have a significant physical presence or in a new market where you are bringing in the new experience.

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In Bahrain, Bank ABC launched ‘ila Bank’ in 2019 – an AI-powered and data analytics digital-exclusive bank. ila Bank is expected to launch its services in Jordan this year before it expands into Egypt, and it also started offering credit cards and loans to Bahraini customers in March.

Saudi Arabia’s cabinet also gave the Gulf state’s finance ministry green light to issue licenses for the country’s first digital banks in June 2021. stc pay (stc Bank) will be converted into a digital bank with a capital of $667 million, while the Abdul Rahman bin Saad Al-Rashed and sons’ company-led consortium will set up another digital bank (Saudi Digital Bank) with a capital base of $400 million.

There is also a new crop of non-bank fintech start-ups called neobanks that have emerged in response to a new, digital era and to address the pain points related to the financial services market of yesteryear. Crespin also noted that when an organisation plans to build a neobank from scratch, there is a need to find people with the right culture to strike a balance and this includes bringing on board bankers to protect the DNA of banking, risk managers, financial expertise as well as compliance professionals.

Zand, the UAE’s first Shari’ah-compliant neobank is expected to open its doors for business soon. Israel’s first new bank since 1978, First Digital Bank, started

WHETHER IT’S A FINTECH LAUNCHING A NEOBANK OR TRADITIONAL BANK ESTABLISHING A FULL SPIN-OFF DIGITAL BANK IT ALL GOES DOWN TO CHOOSING THE RIGHT PEOPLE WHO, FROM THE GET-GO WORK BETTER TOGETHER – Stefan Kimmel Chief Operating Officer, Commercial Bank of Dubai

Banking and Finance news in the MEA market

operations on a trial basis in March 2021 with plans to open to the public in the last quarter of this year.

Stamenkovic said that neobanks are just like small to medium enterprises (SMEs) projects, “some of them will succeed, obviously, and we have some great examples, but some will fail, and particularly, those that don’t get their business model, right.”

He highlighted that when it comes to neobanks or challenger banks it’s not only about attracting the right audience or expanding your market share, but it’s also about the business model, “how you want to create those holistic experiences, how you get that sturdiness across your

digital-exclusive bank business that meets customers’ evolving demands and expectations effectively.

Daniel Robinson, Head of Wealth & Personal Banking, HSBC UAE highlighted the importance of both internal and external culture transformation while noting that recent studies show that the majority of customers still have the bricks-and-mortar banking mindset.

Robinson said that he agrees with other bankers at the roundtable that there is a need for internal culture transformation when approaching digital banking but also noted that financial institutions need to help professionals who talk to clients every day such as wealth advisors and

when you look at culture, one is external, the other one is internal.

Zulu said that the culture in the banking sector differs by country and region, by different demographics and in other categories, and understanding culture could be a major influence that a financial institution can possess as a player in the market. Understanding culture also helps banks to customize their services and products to enhance the customer experience as well as customers’ digital journey.

“When it comes to internal culture, that is within our control. And as we probably all know, culture eats strategy for breakfast!

If you have got a culture wrong, it’s just

product and service portfolio,” while giving an example of N26—which has more than seven million users globally.

asset managers to assist their clients to adopt the digital mindset too.

Stamenkovic echoed the same sentiments saying Mambu is currently working with more than 200 established financial service providers ranging from established banks, fintechs and neo banks, and one reason which these partnerships work is “culture”.

Whilst on culture, Sonny Zulu, Managing Director, Head – Consumer, Private and Business Banking - UAE, Standard Chartered Bank, said that

not going to work,” said Zulu. One aspect of internal culture that Zulu addressed is that around the innovation that has been built in a financial institution, how ideas are taken up? How do you develop them?

How do you take them through up to the end, and ensure that people do not reach a point where they just give up?

Stefan Kimmel, Chief Operating Officer, Commercial Bank of Dubai weighed in saying that whether it’s a fintech launching a neobank or traditional bank establishing a full

Growth prospects The emergence of new technologies is offering the financial services sector a window to be more innovative and provide more efficient service delivery. While it’s important for legacy banks to build digital banks using their existing businesses or fintech start-ups to launch neobanks— having the right culture to create a new

mea-finance.com

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ROUNDTABLE EVENT

spin-off digital bank it all goes down to choosing the right people who, “from the get-go work better together.” A financial institution always has a set of seasoned bankers who are openminded and are digitally minded to start the digitalisation process making the transition a lot easier because “technology can solve everything as long as you get a clear vision on what product and services you want to drive.”

“The real challenge that we have is trying to change the mindset of the people that we have inside every single day,” said Devid Jegerson, EVP Head of Customer Experience, National Bank of Fujairah. “And when you’re thinking in the curve of the adoption of something that is changing, you have always had a latent kind of thing, but if they’re not feeling confident, they will not embrace the change,” said Jegerson.

According to Jegerson banking is necessary but banks are not banking.

“Talking about the culture, we’ve talked about the culture of the employees, but also with traditional banks, there is a big issue about the culture of the people at the top, how you can convince the people at the top that this is not the way to do business going forward?” said Mohamad

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El-Khalil, Director and Head of Banking Supervision, DFSA. El-Khalil noted that financial services providers are facing challenges of the “culture of the people at the top” from regulators, internal auditors, risk managers and external auditors— “all these people still have the culture of how traditional banks operates so how can we make these people think differently, and that’s a big challenge.”

Crespin also noted that the key issue for many incumbent banks is legacy, “but given the way technology is transforming the financial services sector, you better don’t leave a legacy.”

For traditional banks, the transition from a legacy system—which is the core of their business—is almost impossible, he added.

Meanwhile, for neo banks, from the onset they do not have a legacy but later along the way the legacy will come to existence, Crespin said while adding that challenger banks need to set up the phase three guiding principles that you need to reinforce all the time which includes keeping the core as light as possible, work with fintech and solutions providers—a major challenge with most banks and finally leverage the cloud—

Banking and Finance news in the MEA market

which gives scalability and the muchneeded computing power.

While reflecting on the challenges that financial institutions are facing in their digital transformation journey, El-Khalil said, “the challenge is how to create an agile organization, whether this is an existing or what we call a traditional bank, or a neobank.”

Payments Globally, payments remain one of the best performing financial services products but unfortunately for banks— traditionally the main providers of payments services—this momentum is no longer extending to most of them especially under the current operating conditions.

Challenger banks typically use a different business model than incumbent banking institutions. These digitalexclusive banks receive most of their revenue from interchange, the fees paid by merchants when customers make purchases using their debit cards.

Salim Awan, Managing Director, Institutional Payments Solutions, Magnati highlighted that it is the consumer who is shaping the future of banking while adding that the most

important element that is advancing digital transformation within the financial service sector is “payments”.

Customer demands and competition, backed by digital technology and innovation means that the payments sector is the fastest evolving area of financial services.

The growth in the payments sector in the Middle East is also being accelerated by several factors such as the shift towards e-commerce, by both customers and businesses, following the outbreak of COVID-19 as well as by banks’ quest to meet customer expectations and cut back operational risk.

Awan said that payments are one area where there is a lot that needs to be done as he cautioned that digital banks that are not addressing the payment element of the aftermarket, “probably are missing the whole story and the whole piece.” The fact that payments represent the most frequent touchpoints between banks and their customers makes investment in the sector more important than ever.

New technologies and changing customer needs are purveying financial institutions information that provide a chance to innovate and become more

THE CHALLENGE IS HOW TO CREATE AN AGILE ORGANIZATION, WHETHER THIS IS AN EXISTING OR WHAT WE CALL A TRADITIONAL BANK, OR A NEOBANK – Mohamad El-Khalil Director and Head of Banking Supervision, DFSA

efficient when providng services.

There are hundreds of fintechs offering hundreds of value-added services to financial services providers and as the payments market is evolving, positive customer experience will be what really makes a bank standout from the competition.

Saad Ansari, Chief Executive Officer, Xpence, said that one of the biggest challenges being faced by fintechs is forging a working relationship with the incumbent banks, particularly in the UAE. Ansari said that the way payments services providers look at themselves is that they’re trying to solve a problem for business owners. “If you take some of the world’s leading digital banks such as Revolut and Monzo, they all

started as prepaid cards, they took a traditional product, and they emulated an entire banking experience on top of it,” said Ansari.

Customer experience The three trends that are underscoring banks’ urgent n eed to em brac e digital: are strong customer adoption, increasingly multichannel consumer decision journey and customers’ openness to purely digital propositions.

Magnati’s Awan said that it is evident that it is the consumer who is driving the evolution in the financial services sector as far as the market is concerned. “It’s not primarily the institutions which will decide how the consumer will do banking in future,” Salim added.

mea-finance.com

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ROUNDTABLE EVENT

Before the outbreak of coronavirus accelerated the change to digital, making it the leading factory when choosing a bank, the Middle East financial service sector was already seeing a dramatic shift in channel preferences from people of all age groups and demographics towards digital.

Post the pandemic, digital banking champions are those banks who are (will) successfully offer a wide range of functionalities that meet their customer’s expectations, providing an intuitive user experience.

While giving an example based on his experience at TymeBank, Robert Webb, SVP, Core Customer Technology, First Abu Dhabi Bank said that looking at the SME market around digital banking, particularly in the underserved and the emerging markets, “the sector will be naturally led by customers, it would have to be given the amount of friction it takes to get into the SME line.”

El-Khalil said that the changes that are happening in the financial services sector are being driven by both the clients who are looking for a convenient way to use banking services and banks who are looking for ways to do business at a lower cost.

Customer insight plays a critical role in product development and customer communication in the banking sector.

Gaining insights into customers’ preferences remains on top of every management’s priority list as the preference for banking products have become more diverse. McKinsey said, “Understanding what leads to a superior customer experience also enables banks to make thoughtful and efficient trade-offs.”

Manzar Zaidi, Senior Account Executive, MENA, Mambu, said that customer lifestyle banking is the future while adding that whether it’s a neobank or traditional bank, “I think all of those banks that are tracking or can be where the customer is along their lifestyle are the ones that are going to be successful.”

“Meanwhile a lot of the structured and unstructured data that is required

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by financial services providers to make some actionable insights are required to be able to get them from the cloud, for example,” Zaidi added.

“Customer insights, say through call center demand analytics, should feed into banks’ plans to help them increase response times and better serve customers,” says EY.

The Cloud IBM, a leading cloud-based services provider, has said that beyond cost reduction and scalability, speed to market is perceived as the major benefit by the cloud users. As the demands from digitally savvy corporate and consumer customers increase amid competition and increased regulation, financial services providers are being forced to fundamentally calibrate their operating and business models.

Asked by Stamenkovic about the state of cloud enablement in the region, Bhaskar Dasgupta, Head of Markets, Digital Assets & Institutions, VC/FinTech,

Banking and Finance news in the MEA market

ADGM, said that “in this day and age, if you’re still debating whether or not you should be in a cloud, it’s not the right place.” He highlighted that regulators are not much concerned about technological development rather they are concerned about how companies are managing that technology.

The cloud is an enabler of advanced analytics in banks as these computer system resources provide space to both store and analyse large quantities of data in a scalable way, including through easy connectivity to mobile applications used by customers.

El-Khalil said that from a regulatory point of view, technology advances institutional work. He said that regulators are accessing how they can have realtime access and full-time access to a balance sheet of the bank that is under the supervision or operating within a certain jurisdiction.

However, at the same time, El-Khalil noted that technology brings with it a lot of problems. “I think the question is not if

something goes wrong, but it is when it will go wrong? And how we are prepared to deal with the situation when something goes wrong?” Globally, financial institutions are finding themselves a step behind as their existing approaches to combat cyberattacks cannot adequately handle the several threats and burdens, they encounter. Hence leaders in the region’s financial service sector should constantly change their operating models to obtain a holistic view of the evolving landscape of financial crime.

While giving an example of one of “the most rigorous data protection regimes” in wider region that was rolled out by the ADGM, Dasgupta said, “You can just imagine the shock and horror on the faces of CEOs of software solutions companies or the firms that are regulated by the Abu Dhabi international financial center.”

Cloud solution providers offer financial institutions an opportunity to synchronize their enterprise; break down operational and data silos across risk, finance, regulatory, customer support, and more.

IF YOU TAKE SOME OF THE WORLD’S LEADING DIGITAL BANKS SUCH AS REVOLUT AND MONZO, THEY ALL STARTED AS PREPAID CARDS – Saad Ansari Chief Executive Officer, Xpence

The cloud offers a dynamic platform to develop, trial and offer innovative services—driving operating and business model transformation.

As part of Abu Dhabi’s broader efforts to attract investments that build technology capabilities and accelerate innovation, the Abu Dhabi Investment

Office signed an agreement with Amazon’s cloud service unit to establish three data centers in the UAE in the first half of 2022.

“In terms of the cloud providers, Abu Dhabi just signed a deal with Amazon Web Services and we do encourage more provision. But as far as I’m concerned, you got to be on the cloud, it makes you much nimbler,” he added.

Saudi Arabia is also fully investing in the development of its financial services sector as part of the Gulf state’s economic transformation program under its Vision 2030. Last December, Saudi Arabia’s stc Group said that it will invest $500 million in its cloud services in partnership with eWTP Arabia Capital and Alibaba Cloud while Saudi Aramco also joined forces with Google Cloud Services to supply cloud solutions and services.

Dasgupta said that after the global financial crisis and anti-money launderingrelated (AML) issues, “regulators do have a responsibility of admitting that we did encumber with a large incrustation of mea-finance.com

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ROUNDTABLE EVENT

rules, regulations, etc onto the banks.” He noted that from a regulatory perspective, “we found ourselves also as a start-up regulator, in another interesting situation that we decided we have to start leading the market as well in the way that recognizing that we had put more regulations on banks, but it also then becomes incumbent on us to encourage our banks and firms to be sort of forward-looking.”

Dasgupta also highlighted that several regional firms are going through the ADGM RegLab, adding, “we are seeing some very, very interesting propositions.”

Viji Varghese, SVP, Head of Global Payments and Clearing, Mashreq posed a question asking why is it a challenge for vendors to find your solution? Croutear-Foy said, “if you think about core vendors, what they do, they serve as a mass-market to an extent where they will service the core flow in like any way you try and develop and evolve your processes.”

Vendors always go for the core of their distribution curve and tail ends because they are looking at dealing with the maximum efficiency, Croutear-Foy

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FOR TRADITIONAL BANKS, THE TRANSITION FROM A LEGACY SYSTEM, WHICH IS THE CORE OF THEIR BUSINESS, IS ALMOST IMPOSSIBLE – Olivier Crespin co-founder & CEO of Zand

said while adding, “So they are looking for the bigger problems. And there absolutely will be unique solutions, unique services that are required, even in the Middle East region.”

Big data, machine learning (ML), and cloud computing can play a big role in helping banks to understand their customers more and be in a position to make business decisions in real-time including learning about a customer’s spending habits as well as enhancing the agility of financial institutions.

The Mambu and MEA Finance Roundtable was attended by representatives from several financial institutions and regulators including

Banking and Finance news in the MEA market

Miljan Stamenkovic and Manzar Zaidi from Mambu, Neale Croutear-Foy from APEX Group, Sonny Zulu, from Standard Chartered Bank, Amit Malhotra and Stefan Kimmel from Commercial Bank of Dubai, Olivier Crespin from Zand, Saad Ansari from Xpence, Daniel Robinson from HSBC, Viji Varghese from Mashreq, Devid Jegerson, from National Bank of Fujairah, Salim Awan from Magnati, Robert Webb from First Abu Dhabi Bank, Mohamad El-Khalil from DFSA and Bhaskar Dasgupta from ADGM. Our thanks to all panellists and to Mambu for making this an enjoyable and memorable occasion.

SPONSORED CONTENT

Al Muzaini Exchange, Leading from the Start

Hugh Fernandes General Manager, Al Muzaini Exchange Co. K.S.C.C.

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l Muzaini Exchange Co. was first incorporated in 1942, now with more than 117 locations in operation and 2 million customers. Throughout this time, it has continually been providing customers dedicated and top-quality services. Al Muzaini Exchange offers a host of remittance services to customers which include retail transactions, cash currencies and corporate transaction at the best rates and unmatchable service.

Through the company’s state of the art technologies, adherence to quality benchmarks, secure processes and customer-oriented services, Al Muzaini strives to enrich customer experience. This includes Al Muzaini’s online application, which provides a platform for customers to conduct their transactions with ease and security, from anywhere, anytime.

Al Muzaini has a multinational team able to cater to you in your native language. This enables not only to ensure a pleasant customer experience, but to

also avoid communication challenges.

The company is run by teams of highly experienced staff, who bring with them unique expertise and knowledge gained from their banking track records. The team is service-oriented and undertake regular training to remain abreast of the latest developments in the industry. Al Muzaini focus is to offer impeccable service to customers, making transactions as quick and effortless as possible. The company uses the latest technologies for secure and quick transactions.

Al Muzaini’s vision is to make financial services accessible to all. Along with its Strong Network across Kuwait, Al Muzaini’s Digital Payment platform, available in App Store, Google Play & App Gallery, provides a secure and simplified one-stop financial solution to its customers. It offers unique features,

the only financial exchange company in Kuwait that uses the video chat feature for new registrations, which what makes Al Muzaini stay ahead of its competitors.

Hugh Fernandes, General Manager, said: “We are extremely honored to have received awards from such reputable publications. These recognitions st re n g t h e n o u r c o m m i t m e n t of exceeding customer expectations with the development of new processes and systems. We aim to stay ahead in our industry, and to create sustainable relationships with our customers through detailed strategies and high standards.”

Al Muzaini reinforces its commitment to bringing its clients the best services every time, and establishing solid relationships based on deep-rooted, socio-economic values. Closing in on 80 years of service, the company operated

WE AIM TO STAY AHEAD IN OUR INDUSTRY, AND TO CREATE SUSTAINABLE RELATIONSHIPS WITH OUR CUSTOMERS THROUGH DETAILED STRATEGIES AND HIGH STANDARDS

including registering new customers, adding beneficiaries, setting rate alerts and trends, and reviewing transaction history. The application also allows Western Union transfers, creating widgets to track rate fluctuations, for easier access, and live video chats for new customer onboarding and reaching Al Muzaini agents for better quality services, all without visiting a branch. Al Muzaini is

with three main values: quality service, strategically designed processes, and a customer-centric approach. The company converts every challenge into an opportunity to grow, and utilizes its 79 years of operational experience in Kuwait to the advantage of more than two million customers.

For more information about Al Muzaini Exchange, visit www.muzaini.com/ mea-finance.com

31

COVER INTERVIEW

Olivier Crespin Chief Executive Officer, Zand

Together in Strength Olivier Crespin Chief Executive Officer of Zand, sat down with MEA Finance and explained the thinking behind their name and logo, what led him to open a new digital bank in the UAE and how digital can grow into corporate banking

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Banking and Finance news in the MEA market

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hat is the story behind the name Zand and the meaning of your enigmatic logo?

That’s a great question. I really believe that branding is very important. We wanted this brand to represent what we stand for and what we want to represent.

Zand is a contraction between sand and I will explain why sand later - and strength in Arabic, which is “zend”. We wanted strong sand. So, we called it Zand. Why was this? Because obviously here in this country you have a lot of sand, but when you look at any particle of sand, they are all unique and beautiful.

To us that represents our customers; they are all unique and beautiful. It also represents our partners with whom we are working with, and it represents the employees as well.

And what is so unique about these particles of sand? It is that when you bring them together, you start creating a community, you start creating an ecosystem. You can build cities, you can build bridges. You imagine a dune, it just keeps moving, and it can never stop.

So, bringing that all together represents really what we want to do. We want to bring ecosystems together, we want to bring different people with different skills together to address different needs.

And you look at our logo which is, as you mentioned, an enigmatic logo. You end up with an orb that is not complete, because we will be always evolving. This is our brand, and what we stand for is to be always evolving. Another very important point on this is that sand is silicon, and so is digital. And when you read Zand backwards, DNAZ, which means that what is part of us, is a newer generation of company, very modern and advanced.

Obviously, as well, with sand, you have the cloud of sand, which is also a reference to digital and new technology.

I worked on this with Phillip Stark, who in fact happens to be a friend of mine, and when I got the opportunity to start the bank here, I gave him a call. I said: “Look, I would like you to help me

define a name, or logo, and from where everything is going to flow. How we engage with our customers, how we look like, our products.” We have a lot of products around ecosystem-linked financing because it’s always building.

It is the way we build the organization as well because we didn’t build everything ourselves, we are partnering with fintech startups who are complementing the offering we provide. And I think that when we summarize this logo, and what I mentioned about bringing unique skills

we say legacy, it’s not only technology company versus traditional banking, because people always think that legacy is an issue, but it’s more the mindset; legacy that you can really change.

Another aspect is that you can redefine processes, customer experience, journeys, policies and really have a chance at building something totally new.

The second reason why I think this is a great place to build a digital bank, in the UAE, is because we have a very strong ecosystem around us. We have

WE WANT TO BRING ECOSYSTEMS TOGETHER, WE WANT TO BRING DIFFERENT PEOPLE WITH DIFFERENT SKILLS TOGETHER TO ADDRESS DIFFERENT NEEDS. AND YOU LOOK AT OUR LOGO WHICH IS, AS YOU MENTIONED, AN ENIGMATIC LOGO together, or people together working in an ecosystem, being digital, having the cloud, being modern, it is really our mission statement in a very visual way.

So, that is how we can explain what our logo comes from, or where our brand comes from, and obviously it is very important to be able to explain it to the people who work here, and people we want to engage with.

Why were you motivated to build a digital bank, and why launch in the UAE? Why I was in fact, motivated is because I think it’s pretty much a once-in-a-lifetime opportunity to be able to build a bank from scratch like this. I have been working in banks previously, but it was always on top of an existing bank, in India, Indonesia and Vietnam, and here I was with a white page of paper, a blank page.

So, what was the advantage of this?

The advantage of having a white page of paper is that you don’t have legacy. When

strong shareholders as well who are helping us a lot. And you know, when you build a digital bank, it’s very important to be able to link to different ecosystems, and have a great digital environment.

And even at the government level, I think the infrastructure we are getting is so amazing, and they give a lot of capabilities and open a lot of opportunities to build something pretty unique.

The third aspect is, we can get a bank license here. I think sometimes people ask why licence another bank when there are already a lot of banks here. I think it’s primarily because the UAE has a very aggressive digital agenda and understand that to be able to support digital transformation, and to keep supporting the digital transformation of the UAE and become one of the most digital countries in the world, you need a native digital bank built on new technology, built around data that will be able to connect to the digital players that we have here like mea-finance.com

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COVER INTERVIEW

the e-commerce companies or the ridehailing companies.

Not only this, but it is also traditional banks, or corporate organizations who are also transforming themselves. So, it’s very common that you go to a traditional corporation and you’re going to meet people who join them from Amazon or the latest technology companies, because they are also transforming themselves.

So, that is the first aspect, to go direct and support that transformation, but also to push other more traditional banks, to maybe transform even faster. If you have a digital bank in your country, then the thinking is that the others need to transform as well.

The fourth aspect is that to be able to have the opportunity to hire the right people, because a digital bank is about combining two DNAs: the DNA of banking, around risk management, financial expertise, compliance with regulation. So, for that, you don’t want to compromise and you need to bring people who have banking experience, particularly around compliance, business and legal areas and risk. People who are obviously coming from traditional banking but who are ready to change.

And we need to combine with people who are coming from and with the DNA of digital, which is based around customercentricity, leverage of analytics and use of different technologies. So, for that we have been able to find a lot of talent in this area as well, which is a good reason to build something like this here.

The next aspect is, as I mentioned previously, being able to create a brand.

Because we started from scratch (and it’s not often that you’re thinking about your brand before you even start your business) and the business has been built around the brand.

And the last aspect is the location of the UAE, is the way which it connects easily with Asia, Africa, Europe, and even the US and Latin America. I think it’s really at a central location and you can pretty much take the best of all worlds always and be able to establish these

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AND I THINK THE JOB TO BE DONE IS AROUND MAKING SURE THAT THINGS ARE SIMPLER, IMMEDIATE, INSTANTANEOUS AND EASY FOR CLIENTS connections. So, that’s the key reason to build a digital bank here in UAE. Did time spent at Citi and DBS influence your vision for Zand?

Definitely, yes. I spent a lot of time in Citibank, and when there I had the opportunity to work across many different countries and across all types of business from retail, corporate, brokerage, front, middle and back.

So, it was fantastic training toward understanding what can be done if you

Banking and Finance news in the MEA market

want to extend digital further. And at DBS, it was key because I got the opportunity, after a few years working as a banker in DBS, to start the digibank initiative for DBS. That was in 2013 or 2014, and it was a turning point in my career, and I would say a turn for the best because it gave me the opportunity to be able to put in place what I’ve learned across Citi and DBS in those days and be able to bring new technologies and a new look into what a bank can do. It was an amazing opportunity. So, it was a helpful synthesis I guess, all this learning from DBS and Citi.

What are the biggest opportunities and challenges facing digital banks in the region?

I would say the opportunities are enormous because there is really a need, both at the retail level and at the corporate level. At the retail level, when we look at opportunity, we look at what are the jobs to be done. And I think the job to be done is around making sure that things are simpler, immediate, instantaneous and easy for clients.

That’s the first area you need to address.

People don’t want to spend time waiting to open an account, or hold when they are dealing with a call center.

S e c o n d l y, p e o p l e wa nt to b e recognized, and I think that is an unmet need by banks. You know, often you will have a saving account with a bank, but the day you want a mortgage, they’re going to ask you again where you work, what you do, etc., and they will rarely call you by your name.

The third aspect is to be able to bring the client the best products that are almost made just for them, and we solve this with our analytics tool, and what we’re able to do, because our costs are lower than a traditional bank, we will be able to bring some of our best offers to clients.

And the last point is, obviously, at the same time, because we have a bank license, we should be able to give peace of mind to people. So, this will allow you, on the retail side, to start getting embedded with the bank, with us being very present with people, but almost invisible because we’ll be there when you need us. So, on the retail side, we should be able to help people achieve their lifetime goals and we should be there to help people in their day-to-day lives.

That’s what we can do in retail.

On the corporate or commercial bank side, I think, because we are going to

leverage a very strong data analytics platform, we should be able to better understand the needs and the ecosystem in which the respective SME businesses are participating. If we understand these two points, we will be able to be very precise on the product offer rate we should be able to give them, because we will understand the risks better than other banks. So that is why we have a business area, because there is definitely a very strong need to provide financing for SMEs in the UAE market.

And so, for both retail and corporate, what are the risks, opportunities and challenges? The challenge; I would say is that there are so many things to be done that the key challenge is to keep focus on how we are going to be able to keep delivering great services. And keeping focus means not going into products that cannot be digitalized, because then we are going to end up being distracted from our core. So, we will focus on products that can be digitalized. So, for example, mortgages cannot be digitalized for the time being, so we are not going to provide mortgages. But the day we can tokenize a mortgage, we will go into it. So, focus is a challenge.

And also, the second aspect is how we can optimize our capital as well. We have two kinds of products; interest products,

loans and also have a fee income kind of products. So, we move into some fee products as well.

How do you think digital banking can grow into corporate banking and help to improve it?

So, there are a lot of opportunities for a corporate bank. First, I would say that it’s very important to understand that from day-one we have not created silos between retail and corporate. You know, in traditional banks you have a corporate management P&L, and you have a retail P&L. That limits you in what you can offer to clients, because very often even your retail clients are employees of corporates. So, you can really engage in a different way if you understand this. We have a holistic approach around corporate and retail. And I think another area we can always transform, is what I mentioned in the beginning, the ecosystem. The ecosystem is how we are going to engage and a lot of services we are going to provide are going to be linked to this ecosystem so, we call it ecosystem-linked financing to support the corporates. And the same on the retail side. We will engage with customers whatever digital services they are using, because we are there to provide the financial pipes, if you will.

So, you can imagine, you will have an ecommerce focusing on dealing with the client, and we can facilitate the financial transactions of this client.

Where will Zand be in five years from now?

Zand, in five years from now will have a great position in the UAE. We will help to support the digital transformation of the country. We’ll leverage the best technology available in this market. We will be critical in supporting some trade activities between countries and we would have expanded, either directly or through white-labeling or franchising in other countries where there is need, and where we can give support to UAE corporates and companies. mea-finance.com

35

ISLAMIC BANKING & FINANCE

A window of opportunity in Islamic finance Merger and acquisition activity, soaring demand for Shari’ahcompliant products together with proactive government legislation are driving the growth of Islamic banking assets in the Middle East

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he Islamic finance market has grown considerably over the past decade, with several reasons driving the increased demand for global Shari’ah-compliant finance. The industry has inarguably demonstrated positive growth in 2021/22 albeit at a slower rate compared to the previous fiscal year on recovering oil prices and extensive rollout of COVID-19 vaccine.

The current challenging environment has created opportunities to accelerate and unlock the long-term potential of the Islamic finance sector, according to S&P Global. The pandemic crisis is expected to put the Islamic finance industry back on environmental, social, and governance (ESG) investors’ radar, streamline Sukuk issuance to encourage the industry’s attractiveness and leverage technology to create a nimbler finance industry.

“As the GCC region has grown in relevance for emerging market investors in recent years, so too has the Sukuk market,” according to FTSE Russell. The global

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provider of benchmarks, analytics and data solutions said that the market value of the global Sukuk sector has grown from $15 billion in February 2011 to $126 billion in March 2021—representing a CAGR of 23%.

The issuance of Islamic bonds is expected to stabilize in 2021 after five years of expansion, as recovering oil prices have reduced sovereign funding needs in the Gulf region. Moody’s sees total gross shortand long-term Sukuk issuance in 2021 reaching between $190 billion and $200 billion after a record $205 billion in 2020.

The improving economic conditions and high funding needs in core Islamic countries have also improved the assetquality metrics of Islamic banks in the Middle East and the lenders’ liquidity is also projected to remain strong. Although there are no striking differences between Islamic and conventional banks in the GCC region owing to their real economyfocused models, Moody’s said that the absence of late payment fees and higher exposure to the real estate sector

Banking and Finance news in the MEA market

could put Shari’ah-compliant banks at a disadvantage.

The standardized supervision of Islamic finance is expected to lead to greater market confidence and restoration of Islamic bonds’ attractiveness to issuers.

Following the adoption of Shari’ah Standard Number 59 by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the traditional Murabaha structure is no longer held to be Shari’ah-compliant by the Bahrain-based organization.

Driving sustainability Though green Sukuk issuances have been a rare sight in the Middle East, many corporates and sovereigns borrowers have been issuing fixed-term securities to raise funds for projects with environmental benefits such as renewable energy projects.

Moody’s said that Shari’ah-compliant multilateral development banks (MDBs) are well-positioned to benefit from the growing focus on ESGs themes and

sustainable investing, given that Islamic finance principles prohibit investment in certain industries.

The outbreak of the pandemic pushed ESGs to the fore and the trend is expected to enhance the appetite for sustainable instruments as governments and corporates in core Islamic countries seek to spur amid diversification from hydrocarbon-based economies and transition to sustainable financing.

Shari’ah-compliant financial instruments offer a framework that embodies the social and ethical values of ESG investing, offering investors in the Middle East the opportunity to adopt more sustainable and conscious investment strategies while tapping into the potential value of impact investing.

“Islamic finance social instruments can help core countries, banks, companies and individuals economically affected by the pandemic navigate current conditions, with market participants eyeing Qard Hassan, Zakat, Waqf, and Social Sukuk,” said S&P Global.

Green Sukuk and other Islamic finance instruments targeting social needs may appeal to investors with ESG objectives and could help make an even bigger impact if they are leveraged properly.

As core Islamic countries in the Middle East and Southeast Asia are tapping into sustainable sources of energy and moving away from heavy reliance on oil, S&P Global expects increased green Sukuk issuance but does not see it as a game-changer.

A study that was conducted by HSBC showed that 48% of issuers in the Middle East rank ESGs issues as “very important” and while only 6% of issuers have set targets for their net-zero commitments, 78% are already working towards doing so.

GCC Islamic banks are seeing a growing frenzy for green bonds although the appetite is still in its infancy as more investors are committing to responsible investment. Last year, the overall green bond market was worth over $230 billion, and it reached $2 billion in the Middle East region with the potential to grow further.

Sustainable debt covers a variety of instruments, from the well-established

green bonds to the fast-emerging category of sustainability-linked loans, according to Bloomberg. With a new global record of sustainable debt issuance hitting $465 billion in 2019, a 78% increase compared to $261.4 billion in 2018, sustainable finance is a fast-growing category of fixed-income securities.

Abu Dhabi’s Etihad Airways established a Sustainable Development Financing Framework in 2019, under which it raised $117.14 million for cooperate use. The airline also issued a five-year “transition” $600 million green Sukuk to support its shift to a greener future in October 2020 and is currently working on what would be its third financing transaction linked to sustainable investment considerations.

billion in 2019 because more issuers tapped the conventional markets, where it is easier and quicker to get the funds.

Sukuk issuance remains more complex and time-consuming than conventional bonds, hence when Islamic finance issuers need swift access to capital markets, they typically use conventional instruments, said S&P Global.

Islamic finance industry experts expect standardization of Sukuk issuance, which includes both aspects of Shari’ah interpretation and legal documentation, to lead to greater market confidence and restoration of its attractiveness to issuers. Standardization is expected to make Islamic bond issuance comparable with conventional instruments from a

WE EXPECT FURTHER MERGER AND ACQUISITION (M&A) ACTIVITY AS MANY ISLAMIC BANKS HAVE WEAKER FRANCHISES WHICH LACK STRONG COMPETITIVE ADVANTAGES, PARTICULARLY IN PRICING, COST OF FUNDING AND GROWTH OPPORTUNITIES – Fitch Ratings

Finance raised from green Sukuk typically supports investments in renewable energy or other environmental assets such as solar parks, biogas plants, wind energy projects as well as renewable transmission and infrastructure projects, according to S&P Global.

Although overall Sukuk issuance is gathering steam in some of the world’s largest financial hubs like London, the market for green Islamic bonds remains small compared to the conventional Sukuk market. Last year total Sukuk issuances reached $205 billion and only $6.2 billion of that was in green Sukuk, said Moody’s.

Call for standardization The overall volume of Sukuk issuance in 2020 plunged to $139.8 billion from $167.3

cost and effort perspective that it will find a prominent place on the radar for issuers and investors.

A AOIFI and Malaysia’s Islamic Financial Service Board (IFSB), two institutions that have traditionally worked independently on their respective mandates in the past, signed an MoU in 2018 to create a level playing field and foster harmonization and standardization of regulations. The AAOIFI focuses on accounting and auditing standards while the IFSB develops prudential rules in areas including capital adequacy and disclosure requirements.

The adoption of Shari’ah Standard Number 59 by the AAOIFI and the Central Bank of the UAE (CBUAE) is causing some consternation for those involved mea-finance.com

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in Islamic finance transactions structured as commodity Murabaha. A Murabaha cannot be directly refinanced by another Murabaha, hence the traditional Murabaha structure is no longer held to be Shari’ah-compliant by AAOIFI. The UAE took the first step towards the standardization of Islamic finance in May 2020 by launching the Higher Shari’ah Authority. Overseen by the CBUAE, the Higher Shari’ah Authority is a national regulator entrusted with overseeing the Islamic financial sector, approve financial products, and set rules and principles for banking transactions per Islamic jurisprudence.

Moody’s said the initiative by the UAE is credit positive for Islamic finance institutions because it addresses the sector’s main impediment to growth—the complexity and diversity of legislative frameworks and practices across regions and geographies, which creates additional risks and uncertainty in case of litigation.

Since its inception, the Higher Shari’ah Authority ordered the Shari’ah boards of financial institutions in the UAE to apply the Shari’ah Standards issued by AAOIFI as of September 2018.

In Southeast Asia, Bank Negara Malaysia started implementing a revised Shari’ah Governance Framework to strengthen board oversight and the responsibilities of Shari’ah governance. Meanwhile, the central bank of the Philippines, Bangko Sentral ng Pilipinas, implemented the Islamic Banking Act in January 2020. The legislation is seen as the foundation of Islamic finance in the country.

However, standardization poses challenges in terms of implementation and adoption, particularly in realigning existing products.

Sukuk issuance Islamic bond issuance this year is projected to stabilize or to be slightly lower than after a record $205 billion in 2020 and five consecutive years of growth as higher oil prices have reduced sovereign funding needs in GCC countries. “We expect total gross short- and long-term

AS THE GCC REGION HAS GROWN IN RELEVANCE FOR EMERGING MARKET INVESTORS IN RECENT YEARS, SO TOO HAS THE SUKUK MARKET – FTSE Russell

Sukuk issuance in 2021 to reach between $190 billion and $200 billion after a record $205 billion in 2020,” Moody’s.

However, stronger financing growth in the Islamic finance sector is expected to continue in 2021 due to broader adoption and innovative structuring of Shari’ah-compliant products and new, fastgrowing franchises in some Islamic banks compared to their conventional peers.

After a record $205 billion in 2020, this year started strongly with some $102 billion in Sukuk issued in the first six months of the year compared to $99 billion in the same period last year. Increased Sukuk issuance in the corporate sector is credited for partly offsetting reduced issuance from sovereign borrowers in the Gulf region and significant activity in Southeast Asia.

GCC countries have grown in relevance for emerging market investors and several trends in the region such as economic diversification signal continued growth for Sukuk markets.

Last month, FTSE Russell said that Saudi Arabia’s Sukuk will be added to its widely followed local currency Emerging Markets Government Bond Index (EMGBI) starting April 2022. Saudi Arabia’s Aramco raised $6 billion from its debut US dollardenominated Sukuk sale in June 2021 as the state-owned oil giant was looking for funds to pay its large dividend.

Though issuance declined by 65% to $4 billion in the UAE and Bahrain in the first half of the year, notable issuances include UAE property developer Emaar Properties’ $500 million Sukuk, Kuwait Finance House’s $750 million additional Tier 1 Islamic bond and Oman’s nine-year $1.75 billion Sukuk in June that drew more than $11.5 billion in orders.

Islamic banking The current challenging operating environment is likely to put more pressure on Gulf region Islamic banks and lead to more tie-ups to create new national or regional champions. “We expect further merger and acquisition (M&A) activity as many Islamic banks have weaker franchises which lack strong competitive advantages, particularly in pricing, cost of funding and growth opportunities,” said Fitch Ratings.

M&A, soaring demand for Shari’ahcompliant products together with proactive government legislation are also driving the growth of Islamic banking assets in the Gulf region.

Moody’s said that there has been a flurry of deal-making in the Gulf region in the past few years and the trend accelerated in 2020 due to changing operating environments.

In 2020, all M&A deals in the GCC involved at least one Islamic bank.

The merger of Saudi Arabia’s National Commercial Bank and Samba Financial Group into Saudi National Bank, a banking giant with around $223.2 billion (SAR 837 billion) in assets, in April create one of the world’s largest Islamic banks along with Al Rajhi and Kuwait Finance House. The consolidation between Qatar’s Al Khalij Commercial Bank and Masraf Al Rayan is also set to create the fourth largest Islamic financial institution in the GCC region, said Moody’s.

Though Kuwait Finance House shelved its proposed merger with Bahrain Ahli United Bank due to the pandemic, upon completion the merger is likely to create the world’s second-largest Shari’ahcompliant bank. mea-finance.com

39

ISLAMIC BANKING & FINANCE

Investments following Shariah principles present a bright future for Middle East economies As the world looks ahead to a prosperous economic recovery, sustainable development plans, and the future of finance, the Middle East holds a jewel in its crown, poising it for success both regionally and globally.

That jewel is the continued rise and evolution of Islamic finance

I

slamic finance holds the key to unlocking transformative sustainable economic development

Trade and finance in the Middle East remain a central topic of debate for global businesses and governments, as some of the largest investors, financiers, policymakers and industry thought leaders convene at Dubai World EXPO – the region’s landmark event – and following the UAE Central Bank’s Future of Finance Conference.

In recent years, we have seen growing demand for, and adoption of, Islamic finance assets. Shariah compliant assets will play a valuable role in providing investors with a more accessible, familiar entry point into sustainable investment, as well as greater liquidity and global investment opportunities more broadly.

Since Islamic finance shares many common values with that of ESG investment models, aligned to several of the same social and ethical principles, there exists a compelling opportunity in the Middle East for investors to look to Islamic finance as a route to creating a more ESG-compliant, more socially responsible investment portfolio. The

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Christophe Lalandre, Senior Executive Officer at Lombard Odier ADGM Branch and Soumaya Hissoussi, Senior Vice President, Lombard Odier ADGM Branch

economic, societal and environmental upside can be seen clearly.

For instance, with the growing d e m a n d fo r I s l a m i c c o m p l i a n t investment solutions in the Middle East and the necessity for a circular economy, the Sukuk market is an ideal vehicle through which to finance projects focused on addressing climate change and environmental regeneration. The capital of a green Sukuk is used to

Banking and Finance news in the MEA market

finance assets or projects that address environmental issues and investors receive a profit that is derived from green revenues. What does this all mean?

Essentially, that Islamic finance and Islamic compliant assets will be integral in unlocking the opportunity to increase access to investment strategies that offer more sustainable, long-term wealth creation. In doing so, investors can align with increasing demands for adherence

to ESG criteria, and most importantly, play a positive role in our society.

With significant wealth management expertise in the Middle East, investors come to Lombard Odier because of our longstanding heritage, depth of experience and specialist network of financial advisors. We have long placed significant importance on the role of Islamic finance in delivering more sustainable opportunities for value creation and as such, our reputation in Islamic finance has been recognised in the region. Testament to this is our partnership with Saudi Arabia headquartered global asset manager, SEDCO Capital, which has selected us as their investment manager to a global Shariah equity fund, which

build further as we enter Q4 2021 and beyond. The success of the region’s vaccination programmes coupled with increased oil prices will only support the rise of Sukuk issuance. Similarly, as governments and central banks around the world continue to implement economic stimulus measures and monetary easing, these efforts will only further increase the appeal of post-pandemic Islamic finance. In its July report earlier this year2, S&P Global Ratings suggested forecasts for global Sukuk issuance could rise 11% year-on-year, to reach $155 billion, up from $139.8 billion in 2020. With the right macroeconomic conditions in place, and ever-rising consumer demand for

AS THE MIDDLE EAST FORGES AHEAD ON ITS PLANS FOR MORE SUSTAINABLE ECONOMIC DEVELOPMENT, ISLAMIC FINANCE WILL BE A VALUABLE CATALYST IN ADVANCING THE REGION’S PLANS FOR THE LONG TERM marries Islamic finance and sustainable investment criteria in a UCITS fund structure, introducing broader investment opportunities in Islamic assets.

Safety in Sukuks will only further accelerate Islamic finance adoption In the first of half of 2021, Sukuk sales reached a record high as the continued economic impact of the pandemic and ongoing volatility from Treasury rates prompted investors to seek safety and much-required stability in the capital markets.

Data from Bloomberg1 showed that global institutions issued more than $23 billion of Islamic-compliant bonds as of April 2021, the highest on record.

This speed of adoption looks set to

more ethical, sustainability-focused assets, investments following Shariah principles are poised for continued momentum and to bring significant opportunities for capital investments and liquidity to Middle East economies.

It is now for all industry participants and stakeholders to collaborate and create the right level of investor access to ensure Islamic finance can achieve its full potential, and for investors to capitalise on these catalysts.

Technology innovation is attracting a younger, more international Islamic finance user base The convergence of innovative technology and mainstream financial services also presents significant opportunities

1. https://www.bloomberg.com/news/articles/2021-04-15/sukuk-sales-hit-record-as-issuers-and-investors-shun-volatility 2. https://www.thenationalnews.com/business/2021/07/05/global-sukuk-issuance-may-hit-155bn-in-2021-sp-says/

for Islamic finance, both in the Middle East and on a global scale. We have already seen the transformative impact of technology – increasing the speed of consumer access and savviness to financial services, from money transfer and payments to core banking and wealth management services. Shariah finance follows just the same trend.

As partnerships between established financial services institutions and fastmoving fintechs continues to rise, both within the Middle East and between the region and other global financial markets, we are seeing Islamic finance evolve to speak to the needs of a younger, broader generation of investors. With the tech savvy Next Gen, we are seeing younger investors engaging with Islamic finance as a means to remain compliant with Shariah family values and ethics of investing, whilst also accessing broader opportunities for wealth generation.

The road ahead…

Over the next years, we expect further investment opportunities in social and environmental aspects of sustainability – both across climate mitigation and adaptation, but also increasingly in the field of natural capital – and we expect demand for funds focused on natural assets to increase significantly.

Furthermore, we anticipate greater demand for newer, more customised models of Islamic finance, as the benefits of Islamic-compliant assets ring true with investors seeking to build a more ESGfocused investment portfolio. For many, sustainability continues to focus on the environment – and indeed, we see this as a crucial component. However, as more and more investors think more closely about the societal impact of their investment decisions on a global scale, the link between Islamic finance and sustainable finance will become ever stronger. The result? As the Middle East forges ahead on its plans for more sustainable economic development, Islamic finance will be a valuable catalyst in advancing the region’s plans for the long term. mea-finance.com

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HEALTHCARE FINANCE

A Healthy Prognosis With the population of the Middle East and Africa projected to reach 3.4 billion by 2050, the need to expand the public services sector and healthcare, in particular, gives the role of banks and other lending institutions special significance

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he healthcare sector is undergoing a fundamental t ra n sfo r m a t i o n m ov i n g towards the so-called “Health 2.0”—the consumer-centric, outcomesdriven and prevention-focused future of healthcare following the shock from the COVID-19 pandemic. EY said that this tectonic shift is driving significant consolidation and convergence as providers and payers across the healthcare ecosystem look to improve quality, reduce costs, and improve population health.

A l t h o u g h c o ro n a v i r u s c re a te d numerous challenges for the global health

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care sector, it also created enormous oppor tunities for innovators and investors. The outbreak of the pandemic exposed hospitals and other healthcare facilities to unprecedented pressure to help COVID-19 patients but also protect their staff, prevent employee burnout and deal with a surge in cyberattacks.

The use of virtual health, which was already prevalent before the ongoing health crisis but only reserved for primary care and behavioral health, is expected to improve the overall care experience for patients by leveraging the latest cutting-edge technologies.

“In 2020, investors poured $21.6 billion

Banking and Finance news in the MEA market

into digital health companies—more than double the investments made in the prior year and almost four times the amount invested in 2016,” said Mercom Capital Group.

Deloitte noted that before 2020, telemedicine was typically seen as a benefit that some employers made available to their workers, but it has since become the de facto means through which clinicians connect with rural populations, Medicare and Medicaid beneficiaries, and people who can’t travel to a medical facility.

There has also been a surge in dealmaking in the healthcare sector across the Middle East as companies position themselves for improved economic conditions post-pandemic era amid vaccine optimism.

Mubadala’s health unit acquired a controlling stake in Abu Dhabi-based United Eastern Medical S er vices (UEMedical) in June 2021 as part of the sovereign wealth fund’s broader strategy to increase its investments in life sciences and medical technology,

with healthcare viewed as a profitable sector. To alleviate the pressure on the healthcare sector financial institutions in the Middle East region including the National Bank of Fujairah (NBF) and Standard Chartered availed funds to manage the operations of hospitals as well as improve critical infrastructure.

After the passing of the initial shock of the pandemic, some healthcare services providers are taking the opportunity to review their policies and protocols, adopt new technologies to improve operational efficiencies and patient and staff care and define their overall sustainability strategies, said S&P Global.

Wakeup call Making healthcare affordable and accessible for all citizens and residents as well as the entire globe is one of the key focus areas of regional countries.

However, PwC said that risk evaluation for healthcare projects seems to be a major concern for most banks making forays in healthcare financing.

The exposure of some regional banks to scandal-ridden NMC Health, the UAE-based hospital operator that revealed around US$6.6 billion in hidden borrowings, maybe one reason why some regional banks do not have a specific portfolio focused on healthcare but instead on pharmaceuticals, biotech and clinical research sectors.

Banks in the Middle East region rose to the occasion when the pandemic hit providing the much-needed financing to construct, equip and operate hospitals and emergency healthcare centers for the provision of public health services such as COVID-19 screening.

With the population of the Middle East and Africa projected to reach 3.4 billion by 2050, likely more than the populations of China and India combined, the need to expand the public services sector and healthcare, in particular, gives the role of banks and other lending institutions special significance.

The entire financial services ecosystem including banks, asset managers, private

equity firms and hedge funds has a key role in the ongoing provision of long-term financing of the healthcare sector if the world is to achieve the United Nation’s Sustainable Development Goal (SDG) 3— that is global access to health services by 2030. British lender Standard Chartered in March 2020 committed $1 billion to fund companies that are producing medical equipment and providing services that are vital to fight the coronavirus globally including in the Middle East region.

“While health care is a multi-trilliondollar industry, it is an exceptionally challenging space, particularly for investors that are accustomed to other sectors,” said Deloitte.

Private equity is also emerging as one of the most preferred form of funding in the healthcare sector. PwC said that

M&A/Financing The booming global healthcare market and lucrative opportunities in the sector are attracting investments from sovereign wealth funds in the Middle East region. Arab wealth funds are entering the healthcare sector through various channels including capital investment and collaborative ventures with counterparts in areas including medical technology (MedTech), diagnostics, healthcare education and R&D. Mubadala Health acquired a 60% stake in United Eastern Medical Services from Jadwa Investment and United Eastern Group in June 2021, a deal that expanded its healthcare network in the GCC region to include 10,000 caregivers offering more than 100 types of medical services across the UAE and Saudi

WITH THE INFRASTRUCTURE IN PLACE, AND DEMONSTRATED ADVANTAGES INCLUDING CONVENIENCE AND ACCESSIBILITY, HEALTHCARE PROVIDERS ARE LIKELY TO CONTINUE TO DEPLOY TELEMEDICINE AS PART OF A HYBRID DELIVERY MODEL – PwC

private equity funds invest in companies with a proven track record of profitability and sustainable growth. Most private equity funds are keen on investing in the healthcare sector given the high growth and recession-proof nature of the industry. Private equity investments bring in not only the capital but also the adequate strategic planning and management skillsets for growth.

The outbreak of the pandemic has been a catalyst for development in the healthcare sector globally, thanks to the banking sector that financed research and development (R&D) and the distribution of COVID-19 vaccines.

Arabia. The Abu Dhabi wealth fund also made an initial commitment to invest $1.1 billion in Britain’s life sciences sector over the next five years in March 2021 as part of the UAE-UK Sovereign Investment Partnership.

There is an increase in investor appetite for healthcare assets across the Middle East, thanks to the growing population and a shortage of public services. Last month, funds managed by UAE-based Shuaa Capital invested $34.8 million in Swiss pharma-tech supply chain company SkyCell’s Series C funding round.

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Group, the country’s biggest private hospital operator’s plans to acquire Alameda Healthcare Group in May 2021.

Regional banks have also increased lending to the healthcare sector following the outbreak of the coronavirus. Abu Dhabi’s Royal Health Group secured $13.6 million (AED 50 million) from NBF to finance the operations of two emergency COVID19 hospitals, support mobile teams screening for the pandemic at various sites in the UAE and assist the national vaccination campaign.

Last October, Mediclinic Middle East received $25 million from Standard Chartered as part of the banking group’s broader $1 billion commitment to fight the coronavirus. The Dubai Health Authority said more than 350,000 health tourists were received in the Emirate in 2019, generating over $197.7 million (AED 726 million) in total healthcare revenue.

Emerging trends Ac c o rd i n g to P w C, te c h n o l o g i c a l i n n ova t i o n a n d b ro a d e r s o c i eta l changes are shifting the balance of power in healthcare from providers to patients, creating forces that industry stakeholders cannot ignore.

C o ro n a v i r u s i n te n s i f i e d t h e s e d eve l o p m e nts a n d g ove r n m e nts , regulators, and healthcare providers in the Middle East are joining forces in key areas including regulation, publicprivate partnership (PPP), funding and technology innovation to accelerate the transformation of the healthcare sector.

Several healthcare providers in the region switched to telehealth and remote patient monitoring when regional introduced lockdowns curtailed face-to-face appointments. “With the infrastructure in place, and demonstrated advantages including convenience and accessibility, healthcare providers are likely to continue to deploy telemedicine as part of a hybrid delivery model,” said PwC. Overall, funding for health technology organizations and startups has reached

IN 2020, INVESTORS POURED $21.6 BILLION INTO DIGITAL HEALTH COMPANIES— MORE THAN DOUBLE THE INVESTMENTS MADE IN THE PRIOR YEAR AND ALMOST FOUR TIMES THE AMOUNT INVESTED IN 2016 – Mercom Capital Group

record levels and there are no signs that the pace will slow. Some of the Middle East’s popular telemedicine firms including Dubai-based Okadoc, Bahrain’s Doctori, Jordan’s Altibbi and Saudi Arabiabased Cura. KPMG said that the use of telemedicine can play an important role in reducing the risk of patient harm and mitigating some of the growing risks, associated with a steadily increasing workload backlog.

Deloitte said that in 2021, investors will likely be looking closely at technology companies that can combine virtual care with a retail experience—a hybrid model that might allow consumers to access primary care, behavioral health or specialty care through a combination of virtual health and in-person visits at a retail location.

WHILE HEALTHCARE IS A MULTI-TRILLIONDOLLAR INDUSTRY, IT IS AN EXCEPTIONALLY CHALLENGING SPACE, PARTICULARLY FOR INVESTORS THAT ARE ACCUSTOMED TO OTHER SECTORS – Deloitte

ESG in healthcare Debt financing from banks and financial institutions is the preferred route for raising capital for health care providers.

As sustainability, which incorporates environmental, social and governance (ESG) concerns, is increasingly topping t h e a g e n d a s of m o st c o m p a n i e s globally, the healthcare sector is not an exception.

S u s ta i n a b i l i t y- l i n ke d f i n a n c i a l i n s t r u m e n t s a re o n e w a y t h e s e companies can raise funds while highlighting their green or social commitments and reinforcing their sustainability strategy to investors, lenders, and the public.

A study by S&P Global showed that since the beginning of this year, there has been a surge in sustainability-linked loans issued in the European health care sector, reaching $7.3 billion as of May 2021—with health care services companies being the most active.

Considering their innovative features and characteristics, which include a high degree of flexibility regarding the use of proceeds, sustainability-linked loans have broadened the universe of issuers who can obtain sustainable financing and healthcare.

Through the issuance of sustainabilitylinked instruments, health care service providers in the Middle East region can be influential in promoting ESG by focusing on and aligning their strategies with the UN Sustainable Development Goals including good health and wellbeing as well as advancing decent work and economic growth. mea-finance.com

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REAL ESTATE INVESTMENTS

A new approach to the new U.S. Housing Reality Tim Haywood Regional Vice President, Middle East at Walton International Group explains that changes brought by a mix of progression through life and post-pandemic conditions are increasing the appeal of Build To Rent homes in the USA, and thus playing to the firm’s core strengths of pre-development land research and acquisition and land development

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A new way to plug the housing gap

he housing market in the U.S. has been hot property for well over a year already. With land increasingly hard to come by and mortgage rates still at near-record lows, demand has surged since the start of the pandemic – and with it, home prices.

Sentiment has moderated to some extent more recently. Pending home sales, for example, dipped in July, marking two consecutive months of declines, according to the National Association of Realtors1. Yet supply remains constrained.

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Home Council (NRHC) Single-Family Rental Market Index, remained near its record highs in the second quarter of 20213. At 84, the index is sharply higher year over year from 76.

“The U.S. homebuilding industry c o nt i n u es to a d a pt to d i f fe re nt opportunities and challenges accordingly, in line with this trend towards the single-family rental market,” said Tim Haywood, Regional Vice President, Middle East at Walton International Group, the real estate investment and land asset management company.

As a result, affordability continues to suffer. In turn, this is leaving a growing number of potential homebuyers with little choice other than to delay ownership.

The latest results from the Beracha, Hardin & Johnson Buy vs. Rent Index, for instance, show prices at or near their peaks in Dallas, Denver, Houston, Kansas City, Seattle and Miami2. Renting is therefore a more viable option.

Meanwhile, another leading indicator, the quarterly John Burns Real Estate Consulting (JBREC) / National Rental

Banking and Finance news in the MEA market

An ever-more appealing option, both on the construction and consumer sides, is the concept of single-family build-to-rent (BTR) homes.

In particular it appeals to aging millennials, who prefer to rent a home before they transition into family formation years. At the same time, the pandemic fuelled the demand for extra space, stemming from workfrom-home policies which has shifted thinking away from long-held notions of the importance of being close to downtown locations.

This test in the wake of COVID-19 has led to strong financial performance and occupancy growth in the single-family rental home sector.

Based on the largest public, singlefamily rental and BTR transactions, for example, JBREC estimates total 2021 deal volume in the first six months of the year to be over $18 billion. Equity investment in the space is expected to grow in 2022 and 20234.

Tapping into new growth potential This trajectory has attracted many players to the BTR landscape. However, being able to deliver value to the market and, ultimately, investors, requires a mix of several differentiators: a va i l a b l e l a n d , ex p e r i e n c e i n development of lots and a vast network of homebuilding relationships.

a select group of nationally recognized builders and developers to construct BTR communities for approximately 2,500 units throughout the country,” explained Haywood.

Walton has also formed a joint venture with a private commercial real estate investment firm, SVN | SFR Capital Management, to build and operate BTR single-family residential communities nationwide. Colorado and Texas are target markets initially. Pending future announcements with other JV partners are expected.

In Colorado, where Walton has 3,000 of its 81,000 acres across the U.S, hundreds of new single-family rentals are in the pipeline. Target projects include a 100acre land project in Lochbuie, northeast of Brighton where, of the 600-or so homes to be built, up to 125 could be single-family

THE U.S. HOMEBUILDING INDUSTRY CONTINUES TO ADAPT TO DIFFERENT OPPORTUNITIES AND CHALLENGES ACCORDINGLY, IN LINE WITH THIS TREND TOWARDS THE SINGLE-FAMILY RENTAL MARKET “Many organizations entering the BTR space are making value propositions based on a business plan or a concept and are struggling to deploy capital.

Walton has a defined portfolio ready to go with partnerships in place and a diverse land pipeline that we continue to grow,” said Haywood.

As of mid-2021, for example, Walton had already identified 17 near-term opportunities in this space, across a range of locations across the United States.

“We are in advanced negotiations with

rentals. In addition, a 254-acre land project in the northwest corner of Loveland is likely to lead to the construction of roughly 1,000 homes, with anything from 10% to 15% allocated to single-family rentals.

Reshaping the U.S. housing sector The roll-out of master plans across the country is happening at a critical time in the housing sector’s recent history: when affordable housing has been hard to come by because of soaring home sales prices since the start of the pandemic.

1. https://www.nar.realtor/newsroom/pending-home-sales-wane-1-8-in-july 2. https://www.fau.edu/newsdesk/articles/buy-vs.-rent-2ndqtr.php 3. https://www.realestateconsulting.com/our-company/research/single-family-rental-market-index/ 4. https://www.businesswire.com/news/home/20210708005259/en/SVN-SFR-Capital-Management-Forms-U.S.Build-for-Rent-Housing-Joint-Venture-with-Walton-Global-Holdings

Tim Haywood Regional Vice President of Middle East, Walton International Group

Although this is an initial wave of development, it forms part of a longerterm vision for Walton to grow a BTR portfolio. “We plan to construct additional projects within our network of more than 180 master planned communities and through new land acquisitions,” added Haywood.

Ultimately, succeeding in this space relies on owning the land to bring single-family rentals to market as fast as possible. This plays to the firm’s core strengths of pre-development land research and acquisition and land development. With a core focus on land acquisition, zoning and entitlements and partnering with top national homebuilders in the process, build to rent enables the firm to use its existing properties to provide additional singlefamily home inventory to growth markets throughout the U.S. In parallel, the initiative also helps tackle the supply shortage and creates new routes to returns for investors in this space.

“We recognize land is a high commodity for builders and single-family rental companies to enter this space. We are a natural partner for them,” added Haywood.

“For investors, this brings the potential for institutional-scale and quality not readily available in the BTR market.” mea-finance.com

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DATA SECURITY BANKING TECHNOLOGY

Payment Modernization: Why is it a priority for traditional banks Sriranga Neelathali Sampathkumar VP & General Manager - MEA, Infosys Ltd discusses accelerated pace of payment modernization along with key areas for traditional banks to consider as they plan their transformation journey

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ve the last few years, one area of banking that has u n d e rg o n e a m a s s i ve shift is Payments. Rapid urbanization, advances in technology, and the proliferation of smartphones and digital wallets have spurred a surge in online and digital transactions sparking a move to a cashless society.

The advances in payment technology have helped in connecting consumers, banks, and payment processors in a seamless manner.

Millennials expect on-demand banking as well as fast, seamless, contactless, and one-click effortless payment options.

Regulatory institutions and payments industry leaders too are driving this

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change by putting in place measures to streamline payments standards and rein in risk.

The COVID-19 pandemic has led to an acceleration of these trends, shrinking the cycle of change from years to months.

While these shifts were driven by the unprecedented situation brought about by the pandemic, a lot of these changes are here to stay even post the pandemic.

As real-time payment solutions become the norm, we’re likely to witness increasing demand for retail and peer to peer payments, even across borders.

Banks Must Rise to the Challenge The quantum of change is putting pressure on incumbent banks to evolve

Banking and Finance news in the MEA market

Sriranga Neelathali Sampathkumar VP & General Manager - MEA, Infosys Ltd their payments technology strategy and be future ready. Already, fintech firms, low-cost digital payments platforms, technology giants, as well as upcoming challenger banks are riding on digital prowess and differentiated business models to deliver cheaper and better payment services.

Therefore, the time is ripe for traditional banks to look at new ways to deliver value to their various stakeholders. The changing landscape will revolve around:

new market place of various service providers to attract millenials to buy and spend through Liv.

funds from source to destination, providing the support for AML / fraud checks while payments are instantaneous.

For Instance, VISA B2B Connect, a noncard payments rail, helps corporates send money to over 97 countries in real-time, with the sender and receiver having the necessary transparency regarding the payment. It’s partnership with technology players like Infosys has helped to bring this capability to Banks across the globe.

Furthermore, with more and more countries becoming crypto-friendly, we have also seen the rise of the cryptoexchange platform. The platforms enable customers to use their cryptos for money transfer where the receiver gets paid in fiat / crypto currency. They can use it as

• Early Mover Strategy by Tier 1 Banks A great example of this is the Qatar National Bank (QNB), which operates across more than 31 countries in Africa, Asia and Europe. In 2018, the Bank consolidated its multiple payment engines and replaced them with the unified, multi-currency and multientity enabled enterprise payments hub from Finacle. This was aimed not only at boosting business efficiency a boost but making QNB fit for a truly digital future.

• Disruptors N on-traditional alliances such the partnership between telecom player Bharti Airtel and Axis Bank to launch ‘Airtel Money’ is a great example of disruptions in the payments space.

This alliance leverages the companies’ respective strengths in telecom and banking sectors to bring banking products and services that can empower financially excluded citizens of India.

Paytm, which transformed itself from being just a digital wallet player

• Innovative Banking E mirates NBD partnered with

ICICI Bank in India to pilot the first blockchain-based network for international remittances and trade finance. By replicating the paperintensive international trade finance process as an electronic decentralized ledger, the new framework enables all the parties within the framework to access a single source of information in real-time. This facilitates quicker, transparent and secure transactions as well as instantaneous remittance transactions.

RAPID URBANIZATION, ADVANCES IN TECHNOLOGY, AND THE PROLIFERATION OF SMARTPHONES AND DIGITAL WALLETS HAVE SPURRED A SURGE IN ONLINE AND DIGITAL TRANSACTIONS …THE TIME IS RIPE FOR TRADITIONAL BANKS TO LOOK AT NEW WAYS TO DELIVER VALUE TO THEIR VARIOUS STAKEHOLDERS

• Digital Banks Liv. Bank, the digital-only lifestyle bank operated and managed by Emirates NBD Group is a great example of a digital native bank, which is targeted at millennials. It was built on the principles of simplicity, intuitiveness, smart analytics, and API connected ecosystems. The bank attracted more than 370,000 customers at 20% of the acquisition costs of a traditional institution, emerging as the fastest growing bank in the UAE by customer acquisition. With more than 80% of new customer coming by way of referral, Liv. enjoys a high customer satisfaction rate. In addition, Liv. Is bringing a whole

to launch a mobile-first digital only bank in India, is another great example.

Paytm saw the addition of 42 million accounts in 18 months in addition to 500+ corporate clients within just a few months of launch. Paytm drives 30% of open banking transactions in India and witnessed a 400% increase in average daily transactions, clocking 5 billion transactions annually The last few years have seen immense growth in using emerging technologies to support Non-Card based payment transactions. Blockchain as a technology with its inherent capabilities has helped address requirements of traceability of

an asset pledged for a loan. Crypto-linked payment cards where customers make payments using their crypto wallets is picking up pace. For Instance, VISA has recently announced that it facilitated more than $ 1 billion in transactions via crypto-linked VISA cards.

With so many disruptive technologies and Innovative Banks entering the fray, writing on the wall is clear. Modernizing the Infrastructure becomes paramount and embracing seamless digitization, real-time payments and open banking lays the foundation to embrace any new payment technology advancements in the near future. mea-finance.com mea-finance.com

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DATA SECURITY BANKING TECHNOLOGY

Digitising trade to unlock economic growth Huny Garg Executive Director & Country Manager, SWIFT contends that there has never been a better time to digitise trade, to reduce friction in global commerce and support global economic growth

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rade has always been central to economic growth in the Middle East. Located on the old Silk Road, the region has long held a strategic position in international trade, connecting Europe to the Far East, and more recently establishing itself as the main hub for Asian exports into Africa, developing into a dynamic business and financial centre.

The Middle East is also home to one of the youngest populations in the world.

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This generation grew up with technology firmly embedded in their daily lives, only a fingertip away from the rest of the world. As they enter the workforce and become key actors of the economy and business leaders, they expect the same convenience that technology offers in their business interactions.

Digitisation, across all sectors, is high on the agenda of Middle Eastern governments and policymakers. Cisco’s 2019 Digital Readiness Index shows that

Banking and Finance news in the MEA market

Huny Garg Executive Director & Country Manager, SWIFT

the United Arab Emirates (UAE) has forged ahead with digitisation across various areas. For example, Dubai aims for all government transactions, where possible, to be digital by the end of next year.

Meanwhile, Saudi Arabia has pledged to become one of the world’s top-20 digitally innovative nations, positioning digital transformation as one of the four pillars of its Vision 2030 programme. Other GCC markets like Qatar, Bahrain and Oman have also set out their vision and strategy to leverage digital transformation.

Why now is the time to digitise trade Trade is an extremely complex ecosystem, involving not only an importer and an exporter but also a myriad of other actors across physical and financial supply chains, covering multiple countries and industries. This gives rise to differing standards, rules, regulations and legal frameworks.

Digitisation has been at the heart of some of the most significant changes in our lives in the last decade. With high-speed broadband, ubiquitous smartphones, smart offices, smart homes and cars, and the proliferation of apps for every aspect of our lives, this

digital way of life is growing exponentially, and so is the appetite for seamless and convenient customer experiences.

Trade digitisation and its potential benefits have long been discussed by the industry, and while the banking sector has made significant progress in digitising customer interactions, trade remains one of the few areas that still rely heavily on manual and paper-based processes.

Advancements in technology have already sped up supply chains and brought down the cost of doing business.

With better connectivity, richer data and new technology, there has never been a better time to digitise trade.

How the pandemic acted as a catalyst to trade digitisation Our recent paper “Digitising trade: the time is now” outlines how the pandemic has magnified the vulnerabilities of manual and paper-based processes in global trade and suggests how efforts to digitise trade could reduce friction in global commerce and support economic growth.

T h e C OV I D -1 9 p a n d e m i c h a s accentuated the friction, inefficiencies, risks, and control challenges associated with paper-based processes, and demand

for digital solutions in trade shot up as businesses and banks across the world looked for ways to keep international trade in motion.

By late April 2020, documentary trade finance substantially declined by as much as 49% week on week as documented

by SWIFT Watch. However, despite a substantial drop in global trade in the past year, the usage of SWIFT’s Digital Trade Channel solution (MT 798) grew by 72.4% in 2020. This highlights the appetite for digitisation among corporations.

As the world emerges from the pandemic, trade is paramount in enabling the global economy to recover and digitisation has an essential role to play, removing the frictions that ultimately impair access to liquidity and optimisation of financing, with knock-on ramifications for business and growth.

The conversation is now shifting beyond operational efficiency to become a matter of business continuity and risk management. The question of trade digitalisation is no longer ‘if’ or ‘when,’ but simply ‘how’ and ‘how fast?’

Rising to the challenges of trade digitisation For trade to be truly digitised, some mea-finance.com mea-finance.com

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challenges such as legal harmonisation, standards and interoperability remain to be addressed.

One of the main challenges with trade is that we are not only looking at technology. We are looking at a complex ecosystem with a myriad of actors, rules and regulations, both across physical and financial supply chains, in multiple countries and industries.

Digitisation is already well underway in the region, and this is reflected across the financial industry. In a survey from the International Chamber of Commerce (ICC), 44 percent of the respondent banks in the region have indicated that the implementation of digital trade solutions is part of their strategic roadmap in the next one-tothree years. This positions the region very strongly to usher in greater adoption of digital in trade.

Although COVID-19 made it challenging for governments to deliver services in person, the region doubled down on digital solutions and GCC countries recorded 30% higher adoption of online services compared to the rest of the world.1 Banks in the UAE have reported receiving as much as 80-90% of their trade transactions through digital channels in 2020.

Addressing legal harmonisation Governments in the Middle East have been investing heavily in their physical and digital infrastructures in a bid to diversify their economies, and trade is a key focus. In the GCC, as governments strive to reduce their dependence on hydrocarbons, the pace of transformation has dramatically accelerated in recent years. Ports in the region feature among some of the most efficient in the world, with the UAE ranking in the top 20 for ease of doing business.

To further accelerate this digital shift, governments in the Middle East

and across the world have been working to remove legal barriers. Meanwhile policy makers in the region are already introducing various measures to support ‘electronic transferable records’ to help banks digitise negotiable instruments.

For example, Bahrain was the first country in the Middle East to have enacted the UNCITRAL Model Law on Electronic Transferable Records (MLETR). This is often considered a key enabler for digitising international trade. In the UAE,

potential for inaccuracies or incorrect data entered is high (with manual entries), many a time resulting in delays to transaction processing and ultimately leading to losses.

This calls for standards that foster interoperability, such as ISO 20022, and address friction and fragmentation.

Combined with emerging technologies such as APIs, it should allow for newer value-added services for banks and corporates, while also automating and

THE QUESTION OF TRADE DIGITALISATION IS NO LONGER ‘IF’ OR ‘WHEN,’ BUT SIMPLY ‘HOW’ AND ‘HOW FAST?’

the Abu Dhabi Global Market (ADGM) implemented the new “Electronic Transactions Act”, a set of regulations that aim to confirm that electronic signatures, contracts, records and documents are legally enforceable in the same way traditional non-electronic versions are.

Fur ther adoption of MLETR in the region will be key to enabling the seamless flow of trade data across industries.

• Streamlining standards and Interoperability Global trade is a complex and broad ecosystem, and standardisation and interoperability play a crucial role in ensuring connectivity between both physical and financial supply chains.

A typical trade transaction often involves several banks, sometimes from multiple countries, operating across different jurisdictions. This process is often laden with challenges and the

1. https://www.bcg.com/en-mideast/publications/2021/digital-government-services-help-build-trust-of-gcc-citizens

integrating end-to-end transactions.

Richer data offers greater insight into supply chains, helping foster transparent and efficient trade finance. This helps to promote greater financial inclusion by enabling more corporates – notably small and medium enterprises (SMEs) – to access trade finance.

How SWIFT can help Today, SWIFT digitises more than USD 2 trillion in global trade. Through common standards, identit y, and securit y protocols SWIFT enables interoperability between thousands of banks and corporates in over 200 countries and territories. This expertise lends itself to the co-creation of a trade ecosystem – that is standardised, scalable, and interoperable – tackling friction and fragmentation, agnostic to financing structures and solutions.

Now is the time to digitise trade, to work in collaboration with all participants to ensure a global, interoperable, and trusted trade ecosystem emerges from this defining period in history. mea-finance.com mea-finance.com

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OPINION PIECE

The Path from COP26 – Facilitating the Transition Stella Cox CBE, Managing Director of DDCAP and Jennifer Schwalbenberg Chief Governance Officer provide some practical clarity on what needs to be considered and done when divesting from heavy emitting sectors

Stella Cox CBE Managing Director and Jennifer Schwalbenberg Chief Governance Officer

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ntroduction

E S G - fo c u s e d c a p i t a l m a r ke t activities are often synonymous with portfolio divestment from heavy emitting sectors such as oil & gas, cement, steel, aviation and mining.

However, by divesting, ESG-principled investors effectively abandon control to those who may not share the same concerns and who may not exert their influence in furtherance of a sustainable agenda. Equally, by refusing to provide financing to these sectors the capital markets leave these industries without

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the necessary resources to transition to more sustainable practices. Divestment does not result in lower emissions.

The capital markets need to focus on decarbonising the real economy, not their portfolios. Conscientious investors and financiers need to identify those companies making the ambitious commitments, setting strong goals and taking action. If concerned investors support these sectors to transition to new technologies and, where possible, retool to accommodate renewables, they enable these sectors to convert intent

Banking and Finance news in the MEA market

into action. The global finance community, and in particular the Islamic Capital Markets (ICMs), have the responsibility to help accelerate this change and become stewards of said change.

Recent examples of transition sukuk and other commitments Many of these currently high-emission sectors will be sectors the real economy still needs in 2050 and viable low or no carbon alternatives do not yet exist at the scale required. Some sectors face significant hurdles to achieve decarbonisation whether they be economic, technological or rooted in other considerations. Other sectors may not be able to completely achieve decarbonisation but still need to be included in the global economic transition and need assistance to develop effective offset programmes for residual emissions.

Estimates suggest that an annual USD6.9tn in infrastructure investment and between USD1.6tn and USD3.8tn for energy transition is required to meet the Paris Agreement targets.1 As there are not sufficient public funds to satisfy this, private capital is vital, and this presents a considerable opportunity for the ICMs to mobilise funding. To date, there have only been 18 transition bonds globally, and far fewer transition sukuk, but it seems momentum may be growing. In 2020, the Islamic Finance sector saw the first ever transition sukuk by Abu Dhabi’s Etihad Airways, which raised USD600m for investment in sustainable aviation and carbon reduction targets. In March 2021, the Islamic Development Bank (IsDB) raised $2.5 billion with its Sustainability Sukuk, the proceeds of which will be allocated to eligible projects under the IsDB’s Sustainable Finance Framework, which incorporates supporting the transition to

a green economy as one of the three main pillars of its climate change policy.

The market has also seen increased commitment to transition funding in the MENA region. For example, in September 2021, the Arab Petroleum Investments Corporation (APICORP) announced they are considering the issuance of transition sukuk as part of their green bond framework. Additionally, KSA’s Public Investment Fund (PIF) has stated that it would look to “’gradually’ move toward turning down investments that lack their own sustainability plans”.i In the meantime, the PIF has been investing in the transition, boosting its stake in ACWA Power International which focuses on renewable energy sources and investing in electrical vehicle manufacturer Lucid.ii Standing alongside investors and corporates, financial institutions are also supporting clients in this work.

Standard Chartered’s recently introduced Sustainable Trade Finance Proposition in the UAE helps industries transition and reduce carbon emissions by offering financing that recognises their efforts to lessen their carbon footprints. HSBC has made a similar commitment and in early 2021 announced the formation of a dedicated Sustainable and Transition Finance team in the Middle East, North Africa and Turkey which will help institutions, corporates and individuals to transition to a more sustainable future.iii

How to facilitate a meaningful transition Stakeholder collaboration (including multilaterals, sovereigns, global financial institutions) across the ICMs is needed to ensure the industry mobilises the necessary capital as efficiently as possible to those companies with a legitimate

dedication to the transition. Effective leadership from within the ICMs will be imperative to ensure effective standards are put in place, and compliance with those standards is monitored.

In its recent white paper, Climate Bonds Initiative (CBI) have posited what might constitute a “transition bond” or “transition sukuk”. Under this new label, companies would be held to account based on “five hallmarks of a credibly transitioning company, i.e. a company whose transition is rapid and robust enough to align with … the Paris Agreement.”iv These key elements would be the focus and requirement of the certification assessment to achieve the “transition” label. Specifically, the CBI’s hallmarks include: (1) Paris-aligned targets; (2) Robust plans to reduce emissions; (3) Implementation action; (4) Internal monitoring; and (5) External reporting. The proposal, whilst complementing existing ESG frameworks and methodologies, goes beyond them to “avoid transition labelling”. CBI acknowledges that “different industries will have greater or lesser potential to reduce emissions/ increase sequestration over time, meaning that the end goals and speed of transition will vary substantially by sector”, however, the requirement for all would be to reduce emissions to the greatest extent possible, as quickly as possible.

Whether the ICMs look to adopt this framework, or develop their own, the key governance elements must reflect a company’s “willingness and ability to deliver on its decarbonisation targets” as well as provide the necessary granularity “to ensure that those targets are ambitious and in line with climate goals”.v Governance and accountability will be key to ensuring a meaningful transition, requiring transparency not only of targets met, but

1 Climate Investment Opportunities: Climate aligned bonds &issuers 2020 at https://www.climatebonds.net/files/ reports/cbi_climatealigned_bonds_issuers_2020.pdf i https://www.aljazeera.com/economy/2021/9/21/saudi-arabias-wealth-fund-plans-green-debt-issuance-soon ii https://www.aljazeera.com/economy/2021/9/21/saudi-arabias-wealth-fund-plans-green-debt-issuance-soon iii https://www.oerlive.com/oman/hsbc-fuels-omans-transition-to-a-low-carbon-economy/ iv https://www.climatebonds.net/files/files/Transition%20Finance/Transition%20Finance%20for%20 Transforming%20Companies%20ENG%20-%2010%20Sept%202021%20.pdf v https://www.climatebonds.net/files/files/Transition%20Finance/Transition%20Finance%20for%20 Transforming%20Companies%20ENG%20-%2010%20Sept%202021%20.pdf

targets missed. Projects must be analysed not only from an investment perspective but also from an efficiency perspective, to avoid needlessly repeating structures that do not produce optimal results. Transition financing must address scope 1, 2, and 3 emissions and short, medium and longterm targets must be set. The ICMs need to work together to agree methodologies and governance structures to be able to get to work to address these considerations and enable the transition.

Call to Action to Facilitate the Transition The Earth is what all of humanity has in common; it links people across cultures and continents. What impacts this planet will impact all, but not necessarily equally, and many of those least responsible for this crisis will, and in some cases already do, number amongst the communities most impacted. The world has already seen its first climate refugees and if the current trajectory is maintained, they certainly will not be the last.

The discussion in the final weeks of the run-up to COP26 in November 2021 has shifted from what to achieve at COP26 to where does one begin after COP26.

Recent data shows that even with the drastic changes to the living and working patterns of much of the global population during the COVID-19 pandemic, there wasn’t a significant reduction to global emissions. Further, without efforts for protection and preservation of a habitable planet, the UN Sustainable Development Goals will not be achievable. Therefore, a strong argument exists for increased efforts to bolster action to reduce emissions and protect biodiversity. But as actions require resources, the financial community, and in particular the ICMs, must focus on mobilizing resources to meet these goals. The ICMs have a responsibility to meet this call to action, to continue to mobilise funding for green, blue and sustainability projects and begin to formalise their plans to dedicate resources to facilitating the transition required. mea-finance.com

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OPINION PIECE

Middle East Banks Double Down on Digital Customer Experiences Post-Pandemic Mike Plimsoll Global Head of Industry Marketing, Sitecore sees that our region is enthusiastically forging ahead with digital banking innovation but that they should also consider mobile access, user experience, compliance, pervasive security and the right tools for success in this new era of digital banking

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he pandemic has fundamentally s h i f te d h ow M i d d l e E a s t banks deliver on customer experiences, rapidly shifting from a branch- centric, in-person approach to one that is digital-first, across websites, mobile apps, and customer call centers.

Having one flexible and composable digital platform that can unify how banks engage with their customers across all channels is vital for optimizing customer experiences and retaining their loyalty.

Banks should evolve their thinking from “the next best content” or “the next best option” towards combining the right content with the right insights in realtime to deliver “the next best customer experience.” In order to keep pace with the rapid pace of technological change,

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banks need to adopt an adaptable and composable architecture to deliver more relevant, consistent, and high-quality customer experience – regardless of new and emerging platforms or channels.

G ar tner predicts that by 2023, organizations that have adopted a Composable Commerce approach will outpace the competition by 80% in the speed of new feature implementation.

Leaders are adopting a MACH approach: Microservices, API-First, Cloud-Native, and Headless.

A l re a d y, t h e M i d d l e E a s t h a s been among the global leaders in transforming customer experiences.

According to a recent YouGov survey of more than 650 IT decision-makers across the Middle East and North Africa, 88% said they fundamentally changed

Banking and Finance news in the MEA market

Mike Plimsoll Global Head of Industry Marketing, Sitecore

their customer experiences in response to the pandemic, leading to deeper customer engagement.

Emirates NBD and Mashreq Bank Lead Digital Banking Innovation In the Middle East, leading banks such as Emirates NBD, and Mashreq Bank are all driving digital innovation to optimize employee and customer experiences.

At Emirates NBD, a new app and website with engaging, personalized banking and lifestyle content has helped Liv. to shake up the UAE financial market and become one of its top service providers. Sitecore’s platform

to talk through any issue or question with someone in the branch.

Increasingly, Middle East banks are now adopting a hybrid model by installing videoconferencing kiosks in the branch.

Customers do not have to wait in line to talk to a teller, but they can still talk to a member of the customer experience team face-to-face in a virtual format.

Customers may prefer having sensitive financial conversations in the privacy of bank branches, rather than in shared apartments or offices that are less private and may have lower levels of connectivity.

As Middle East banks start planning and delivering on the next steps in their digital transformation journeys, they should consider mobile access, user experience, compliance, pervasive

has delivered operational efficiencies and introduced new governance and analytics capabilities. The response from employees has been very positive with 80% liking the new experience.

M o re t h a n 5 0 y e a r s o n f ro m Mashreq’s inception, the bank maintains an unwavering commitment towards customer centricity. Through Mashreq’s digital-first approach, customers can benefit from a banking experience that is convenient, tailored to their needs, and meets their evolving demands. A modern, intuitive, and user-friendly website is imperative in digital transformation.

In collaboration with Sitecore, Mashreq Bank not just enhanced the overall experience on its website, Mashreq Bank also implemented a Sitecore content management system that enables the bank to deliver content across all customer channels through an API, which makes it a powerful tool for its mobile and web developers.

if they can’t find what they need in just a few clicks. And 87% said customers have less patience with slow or poorly functioning websites.

Among younger users, bank apps are taking on increased importance.

Worldwide, 75% of Millennials say they use mobile banking apps, according to a recent white paper.

At the same time, banks have also had to fully onboard their senior citizen customers to use digital banking platforms. Based on our discussions, we are seeing that the two most frequent questions the customer service teams are getting: How do I log on to the bank’s website with my credentials? And is online banking safe? Banks need to place this front and center.

Aligning Customer Experiences in Branches and on Digital Platforms

HAVING A FLEXIBLE AND COMPOSABLE PLATFORMS IS VITAL FOR OPTIMIZING CUSTOMER EXPERIENCES IN BANK BRANCHES AND DIGITAL CHANNELS

In discussions with leading Middle East banks during the recent GITEX Technology Week, we are seeing that Middle East banks have the bold visions to try new forms of customer engagement that are, in some cases, leapfrogging the legacy banks that are in Europe and North America.

The Middle East, and especially the UAE, have the advanced technology infrastructure and visionary CIOs, who can lead innovation. One key takeaway is that the era of digital banking will only continue to accelerate in the Middle East – with banks rethinking their in-branch experience and driving hybrid models that can meet customers at any time, any location, and across any in-person or digital platform that they want to engage.

The website experience is vital.

Among MENA IT decision-makers, 88% said their customers will navigate away from a site and choose an alternative

– Mike Plimsoll

Videoconferencing has also taken hold during the pandemic for enabling remote work, and in turn also enabling a new level of customer service. If customers are already on their laptops or mobile devices, banks should be making it easy for one click to video chat.

At t h e s a m e t i m e, M i d d l e Ea st banks are also re-thinking the branch experience. Every country is different in the Middle East in terms of regulations a n d c u l t u ra l d i f fe re n c e s . M a n y customers are still used to doing banking activities such as depositing checks or applying for loans, or just want someone

security, and the right tools for success in this new era of digital banking. Open and composable architecture is the foundation for banks to future-proof their customer engagement by bridging data, content, and organizational silos with APIs and micro-services.

Moving forward, the best banks are mapping out digital strategies that include embracing real-time customer d a ta , c re a t i n g a s t ro n g c o n te n t foundation, allowing experimentation and optimization, automating marketing execution, embracing new composable architecture. mea-finance.com

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LIFESTYLE

Jacob & Co. unveils firstever minute repeater in sapphire crystal case

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machiner y behind the Twin Turbo Furious. Those with a keen eye will able to witness the manual winding JCFM05 movement that features a 50-hours power reserve. The decimal minute repeater, two high-speed tourbillons, and mono-pusher chronograph a re a d d i t i o n a l a s p e c t s that make the watch even more exclusive.

The only part of the watch that is not constructed out of sapphire crystal is the 18k white gold crank that sits at 3 o’clock. Being that this is the first watch to ever incorporate a minute repeater inside a sapphire crystal case, the complexities of the watch are heightened. Watch lovers can choose between the “Bugatti Blue” Neoralithe chapter ring or the other two colors which come in bright red or green.

acob & Co. has released its first trio of minute repeaters in a sapphire crystal case.

The three timepieces are a part of the watch company’s Twin Turbo Furious collection which not only features a fully transparent sapphire crystal case but a decimal minute repeater. The combination makes it a first in the world of luxury watches.

The collection includes the “Bugatti Blue” wrist piece, which celebrates J acob & Co’s partnership with the highperformance car manufacturer.

With each of the watches heavily inspired by the elegance and sophistication of hypercars, each colorway is only limited to six pieces. The completely see-through casing provides watch lovers an i m m e d i a te v i ew of t h e c o m p l ex

EXECUTIVE DIRECTOR AND PUBLISHER Kenneth Mitchen ken.mitchen@mea-finance.com GROUP COMMERCIAL DIRECTOR Nap Estampador nap.estampador@mea-finance.com Tel : +971 50 100 5488 DIRECTOR Andrew Cover andrew.cover@mea-finance.com Tel: +971 50 931 3236

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EVENTS AND MARKETING MANAGER Cris Balatbat crissyb@mea-finance.com Tel: +971 58 594 4818 ADMIN AND FINANCE MANAGER Marilyn Nainque marilyn@mea-finance.com Tel: +971 58 5025836

FEATURE CONTRIBUTORS: Adrian Murdoch, Mushtak Parker, Walter Sebele editorial@mea-finance.com

WEB ASSISTANT Marie Orayan web@mea-finance.com

Banking and Finance news in the MEA market

Dubai office: #404, Building B, Al Saaha Offices, Old Town Island Burj Khalifa District PO Box 487177, Dubai, UAE Email: info@mea-finance.com

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