Why Fintech has the ability to transform SMEs in the region

Nahla Davies is a software developer and tech writer. Before devoting her work full time to technical writing, she served as a lead programmer at an Inc. 5,000 experiential branding organization whose clients include Samsung, Time Warner, Netflix, and Sony.

Small and mid-sized enterprises (SMEs) play a huge role in the economic growth of countries in the MENA region. SMEs are responsible for employing half of all the workforce in this area and make up 70% of the region’s GDP. Despite these impressive numbers, SMEs have the potential to power even more growth in the Middle East, if given adequate resources.

Limited access to credit and lack of funding opportunities are real obstacles for growth among SMEs in the Middle East. Furthermore, the coronavirus pandemic has hurt the profits of small businesses and has impacted the funding of startups, especially those in industries that were unable to keep up with the accelerated level of digital transformation. Thankfully, with the growing prevalence of financial technology, connecting small business owners with transformative tech and investors has never been easier. 

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Fintech support

Small businesses are essential to the economy of the MENA region. However, many of them suffer from a lack of access to finance. Small businesses need alternative access to funding, which Fintech can provide through peer-to-peer lending. For example, startups such as Fintech Galaxy help in connecting the global Fintech ecosystem by offering a cloud-based innovation crowdsourcing platform, an open API sandbox, and an AI-powered global Fintech marketplace. Companies like Paytabs, Souqalmal, and Beehive all provide payment solutions and peer-to-peer finance to aid SMEs with getting online, gaining access to lower-cost finance, and making card acceptance easily integrated with lower costs and minimal fraud.

Furthermore, small businesses can enhance their business by utilizing Fintech applications that enable them to securely accept money online. Paytabs, for example, helps merchants complete transactions safely online. Souqalmal can help connect small businesses with insurance online, as well as process claims digitally. Beehive enables peer-to-peer lending that opens up funding to small businesses that were never possible before. SMEs will therefore have an increased ability to access digitalization in a way that is quick, convenient and that gives them access to a higher chance of being approved for funding than a traditional bank loan. 

The future of Fintech

The coronavirus pandemic has changed many people’s views about digitalization. People are now viewing smartphones and a reliable internet connection as a necessity, rather than a luxury. In part due to restrictive lockdowns that barred people from leaving their homes, Fintech apps have seen a 72% increase in usage in the past year. People are warming up to the idea of Fintech as they see how new technology can democratize finance, build better business connections, and empower individuals who prefer to work privately from home.

Traditional banking institutions have sometimes been at loggerheads with up-and-coming Fintech startups, viewing them as competition or as passing fads. The reality couldn’t be farther from the truth. Experts say that Fintech is here to stay, and financial institutions that collaborate with Fintech companies will have an advantage over others who view them as competition.

MENA governments encouraging Fintech

Governments in the MENA region realize the ability of Fintech to enable more secure transactions for SMEs and accelerate economic growth as a whole, but there are several factors to contend with. Unfortunately, many Middle Eastern countries can experience “brain drain” when highly skilled workers choose to leave their home countries for opportunities in other areas. This makes it exceptionally difficult for homegrown SMEs and tech startups.

Middle Eastern Fintech companies also have to comply with different financial regulations across the continent, as well as protecting their own citizens from financially motivated cybercriminals.

The central bank of Saudi Arabia, known as the Saudi Arabian Monetary Authority or (SAMA), grants permits to Fintech companies so they can join the bank’s experimental regulatory sandbox. This concept allows companies to test their applications in a safe environment before deployment. This level of cooperation between government and tech startups creates an environment of growth and exploration that will surely fuel new tech innovations in the future.

Saudi Arabia and UAE have also united in their call for a regional and government-backed cryptocurrency, revealing how progressive the countries have become in regards to financial technology. The new cryptocurrency, called Aber, could potentially protect the region from the negative effects of inflation that will be seen in the US dollar, which serves as the world’s reserve currency. SMEs in the Middle East stand to benefit from Aber since it’s intended to enable more secure data transactions, reduce trade barriers, have lower transfer fees, and enable smart contracts, which will automatically enforce agreed-upon terms and conditions without needing middlemen.2021 Emerging Venture Markets Report


SMEs account for 96% of all companies in the Middle East and North Africa, yet only 7% receive loans from banks. This is one of the lowest levels reported in the world and there are many barriers SMEs experience in receiving these loans.

Several SMEs do not have established credit scores, at least partially due to the fact that culture in the region can discourage lifestyles of debt and lending practices. Furthermore, the fact that roughly 60% of SMEs are the victims of major cyberattacks (including malware or phishing) each year also provides a reason for caution.

Fintechs need a tiered cybersecurity framework that can provide guidance to SMEs on which cybersecurity controls they need to adopt. This tiered framework should begin with the baseline compliance requirements, and then provide more complex measures that are specific to the assets they are intended to keep secure. As a result, it’s not hard to see why some banking institutions are wary about funding SMEs and view them as risky investments, especially in today’s unpredictable global economy and the increasing threat of cyberattacks. 

The United Arab Emirates considered the financial hub of the Middle East, leads the region in embracing Fintech. In fact, the UAE’s city of Dubai is already home to half of all Fintech companies in the region.

It’s for this reason that the UAE is essentially acting as the gateway for SMEs to access capital in the Middle Eastern region as a whole, due to the fact that the country’s embracing of financial technology permits SMEs to connect business owners to investors in other countries (via innovative technology that enables speedier and more secure transactions without the assistance of third parties), mentors, and other support services to help companies flourish. We have already seen a significant amount of investment, innovation, and Fintech startups in the Middle East and this trend is sure to continue.

Fintech is more essential now than ever, but due to social distancing requirements and travel restrictions, networking and in-person meetings with potential investors or collaborators have been put at standstill. Fintech has the potential to supercharge industries and economies around the world, bring investment opportunities to the masses, and connect good ideas with willing investors, all in the convenience of an app on your phone. It’s hard to fully appreciate the economic changes that will be ushered in by the increasing use of Fintech apps, but we are sure to see just how much they will affect global economies in the coming years.

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