Complex Made Simple

Billions in remittances to cross through ABER benefitting inter-Arab trade

Arab states are getting on the fintech bandwagon. How will cross border payments benefit?

The crypto-based system through the use of blockchain technology named ABER favours Arab currency for cross-border payments among 22 member countries The total value of economic and financial transactions among Arab nations is estimated to have reached up to $830 billion Global funding in financial technology increased by 120% in 2018 to $111.8 billion

Economic growth among Arab countries is expected to be 3% this year and 3.5% in 2020, according to the director general of Arab Monetary Fund, Dr Abdul Rahman Al Hamidy.

Arab countries traded what amounted to $585 bn between themselves without the recourse to any fintech-facilitating tool.

That’s about to change.

ABER

The Arab Regional Payment System (ARPS) that Saudi Arabian Monetary Authority (SAMA) and the UAE Central Bank (UAECB) piloted in January 2019 aims at expanding intra-Arab trade and investment activities.

The crypto-based system through the use of blockchain technology named ABER favours Arab currency for cross-border payments among 22 member countries and has the added-value of cutting the cost and duration of remittances and payments between them.

“The project is in the final stages and we are close to finalising the articles of establishment like building the system for smooth transactions. We will soon release the date when the actual transactions will start,” said Al Hamidy last Wednesday.

The investment involves putting an initial capital of $100 million.

Arab business deals

The total value of economic and financial transactions among Arab nations is estimated to have reached up to $830 billion per year, of which $245 billion is attributed to intra-Arab trade in 2018, according to estimates by the Arab Monetary Fund (AMF), Al Hamidy.

“ARPS will also foster the economic, trade, and investment relations with the region’s main trade partners from all parts of the world, considering that trade between the Arab region and the global economy amounted to roughly $1,960 billion in 2018, which equates to 5% of total global trade,” Al-Hamidy added.

Fintech such as blockchain enhance the efficiency of payments and create new opportunities such as access to remittances amounting to billions of dollars, not only among expats living in Arab countries but also Arab expats living abroad.

Zawya said that a recent KPMG report revealed global funding in financial technology increased by 120% in 2018 to $111.8 billion up from $50.8 billion in 2017.

The chief executive of Bahrain Fintech Bay told Zawya earlier this month that Middle East fintech investments make up just 1% of the global total, but he added that cross-border collaboration could significantly boost the industry’s growth.