Abu Dhabi can be regarded more and more as a part of Silicon Wadi. Especially FinTechs are booming in Abu Dhabi and Dubai due to the new economic frame of the ‘Abraham Accords’. Learn more about Abu Dhabi’s FinTechs: Subscription just $29,90/12 months (net).
In the first part of this small series on Fintechs in Abu Dhabi we covered first insights to the general frame of Fintech in the UAE at large. Now we want to turn to the frame of another major players: The Investment Funds. About the VCs in the UAE VonNaftali already gave some insights.
Since 2017 major investment funds are developing both in the UAE and Bahrain. To a certain extent these ‘Abraham Accords States’ have to be seen as an entity, at least on the economic level.
There is a kind of a common market yet to come within the frame of the Abraham Accords. There is no a real competition between UAE or Bahrain and the competition is rather folkloristic. But the real competition is between the free (trade) zones and causes a lot of tensions and uncertainties. UAE is in the focus and gives the pace.
Six major investment funds can be highlightend which raised about $2 billion and provided with a capital base of roughly $1,5 billion. These funds are initiated by politics as the Milken Institute wrote in his study on the capital market of the MENA region:
“In many cases, these funds align with the strategic initiatives set by officials in Bahrain and the UAE, which are explained in more detail below. These initiatives seek to attract world-class talent to the region, further diversifying the economies within each country and positioning the region as a player in the global venture investment ecosystem.”
Two of these funds have an exclusive focus on fintechs as its name already explains: Fintech Fund and Global FinTech Fund. The other funds are also investing in other industries and branches as already delineated in part I of this series.
The Major Investment Funds
Abu Dhabi Catalyst Partners (Abu Dhabi, est. April 2019, Capital: $1 billion)
Ghadan Ventures Fund (Abu Dhabi, est.March 2019, Capital: $150 millions)
DIFC FinTech Fund (Dubai, est. March 2019, Capital: $100 millions)
Al Waha Fund of Funds (Bahrain, est. March 2018, Capital: $35 millions)
Global FinTech Fund (Bahrain, est. May 2018, Capital: $100 millions)
The Real Competition
“These developments are the product of strategic initiatives championed by a variety of stakeholders.29 Again, FinTech is part of much larger efforts among policymakers and regulators across the region to diversify their economies, including strengthening and promoting their financial services sectors and creating a favorable, competitive marketplace for both startups and incumbents to flourish.”, says the Milken Institute as conclusion.
However, “(…) Perhaps the best FinTech “horse race” to watch within the region is not the race between Bahrain and the UAE, but the race between these two free zones within the UAE. Not a week goes by without news of a new initiative being launched or regulation being adopted by one of these regulatory authorities as part of larger efforts to build themselves into FinTech hubs for the region.The competition between ADGM’s FSRA and the DIFC’s DFSA to attract and develop world-class talent in the FinTech space has spawned a number of regulations and initiatives since 2016.”
All the efforts that the UAE and Bahrain made around 2018/2019 to establish a FinTech industry – indeed had to establish one, because the classic banking business has an expiration date – would have quickly become stranded investments without the framework of the Abraham Accords. The major challenge is to attract talents and management competence.