Bahrain’s central bank wants the Middle East island state to become a regional hub for financial technology startups (fintechs) looking to break into the Gulf Cooperation Council (GCC) countries.

To this end, a delegation from the Bahrain Economic Development Board (EDB) attended the recent Innovate Finance Global Summit in London.

Speaking to Computer Weekly at the event, Dalal Buhejji, senior manager financial services at the EDB, said the organisation wants companies to set up shop in Bahrain to access the entire GCC region.

Because Bahrain is a small country, it is easy for such companies to test their products before implementing them across the region, she said.

Bahrain’s central bank is striving to put the right regulations in place to encourage fintech development, said Buhejji, adding: “Bahrain has moved very fast over the last few years and put in the right framework to support fintech growth.”

This includes a regulatory sandbox, introduced in 2017, which provides a testbed for fintech startups. As a result of the sandbox, there are new rules around open banking, cryptocurrency exchanges and robo advisories.

“Some fintechs can’t get going in their home regions because of market saturation and decide to take it into the GCC, with Bahrain a good starting point,” said Buhejji. “We want fintechs that want to expand in the GCC region to come and test out their products in the Bahrain central bank regulatory sandbox.”

The sandbox currently has 29 fintechs. “It is a very diverse set of fintechs in the sandbox, with cryptocurrency exchanges, robo advisories, insurtechs and open banking companies,” said Buhejji.

Two companies have graduated so far – cryptocurrency exchange Rain Financial and open banking fintech Tarabut Gateway.

There are other fintechs operating in Bahrain, but the sandbox is looking for ideas that do not currently fall within a regulator’s remit. “We can take on any fintech in the sandbox that has a solution that is innovative,” said Buhejji. “If it is something that is already covered by the Bahrain regulator, such as a payments service, it would apply to the existing regulator.”

The sandbox programme sees companies test their products over a nine-month period. The central bank will then either create new regulations to cover these products or change existing regulation to accommodate them.

The programme does not have cohorts, but rather enrols startups that graduate when they are ready. “We don’t want to limit the industry and tell people to wait for the next cohort,” said Buhejji. “We want to ensure we grow in a speedy manner.

“The central bank monitors these companies on a weekly basis and when they reach nine months in the sandbox, they will have to decide whether to move to graduation.”

Beyond regulatory innovation, Bahrain offers other advantages for global fintechs looking to scale beyond their existing markets.

For example, Bahrain has long been a financial services hub, hosting about 400 financial institutions and there has been a regulator in the sector for the past 40 years. This has created a skills pool within the country.