Context of the partnership
In a noteworthy development focused on fostering innovation and offering essential regulatory support to the burgeoning fintech sector, the Israel Securities Authority and the Central Bank of Bahrain have formalized a partnership through a recently signed agreement as reported by Times of Israel.
Bahrain’s Foreign Minister, Abdullatif Al Zayani, and Ron Klein, Deputy Director of International Affairs and Markets Development at the Israel Securities Authority, signed the agreement earlier this week. The primary objective of this alliance is to offer regulatory guidance to emerging fintech entrepreneurs in both Israel and Bahrain.
This agreement highlights the evolving trade relations between the two nations. It serves as a testament to Israel’s Foreign Minister’s recent visit to Bahrain, with a focus on enhancing economic ties and eventually pursuing a free trade agreement.
The genesis of this collaboration can be traced back to the historic Abraham Accords, brokered by the United States in 2020, which paved the way for diplomatic relations between Israel and Bahrain.
Key Objectives of the Collaboration
The primary goal of this partnership is to enable the exchange of data and expertise and promote innovation. Another important objective is to help streamline regulatory processes, particularly for entrepreneurs seeking to expand their financial services offerings on a global scale.
Yosef Zinger, incoming Chairman at the Israel Securities Authority, emphasised the importance of this collaboration, stating, “Israel is a financial tech powerhouse, and we see great importance in building bridges to support the global activity of Israeli companies in this industry. We continue to advance open banking reform and work in cooperation with our counterparts worldwide to create an ecosystem for the promotion of digital financial services in Israel.”
Bahrain and Israel’s Strategic Position in the Financial Landscape
Both Bahrain and Israel have notable achievements in the fintech industry. The Central Bank of Bahrain serves as the kingdom’s sole financial market regulator. It also plays a pivotal role in maintaining financial stability and attracting investment. Its strategic location offers advantageous access to the Cooperation Council for the Arab States of the Gulf, including Kuwait, Oman, Saudi Arabia, and the UAE.
Israel, too, is renowned as a financial technology powerhouse and has actively promoted open banking reform. This reform aims to enhance competitiveness by allowing non-banking entities to offer services at competitive rates, ultimately reducing costs for consumers.
Israel’s fintech sector has experienced remarkable growth in recent years, attracting an impressive $7.2 billion in investments in 2021, a threefold increase from the previous year.
Currently, the nation is home to 550 fintech companies, employing nearly 20,000 individuals domestically and 18,000 abroad, with a strong focus on global service provision.
Potential Challenges
While the Israel-Bahrain partnership in the fintech sector offers promising prospects, it also presents some challenges.
Effective collaboration across diverse cultures and regions can for instance be difficult. Problems can occur, such as language barriers, comprehending varying business practices, and fostering trust among stakeholders.
The countries can also encounter hurdles related to their long-term viability and scalability and this raises an important question: Will Bahrain and Israel be able to ensure sustained growth in a fiercely competitive global market?
Regardless, this collaboration shows that there is potential for synergistic partnerships among nations in the pursuit of fintech excellence. However, it is too early to state whether or not it has been a success.