Growing up in the Middle East with a lack of a culture of saving and investing, many young Arabs turn to online banking to track their spending and budget.
When Mayar Akrameh was growing up in Lebanon, financial advice was simple: work long, work hard, and aim for a high paying job.
Today, the 29-year-old management consultant is one of a growing number of young Arabs who are turning to financial technology, or “fintech,” to help them save and invest, a practice often overlooked in the Middle East. East.
“We are taught that if you work and earn enough money, even if you hate your job, you are good,” she told AFP. “Or they think we’re good.”
Akrameh moved to the United Arab Emirates in 2019 at the onset of the financial crisis in Lebanon, which would later see the local currency plunge to historic lows, with many denied free access to their savings due to bank checks strict.
The region’s economic instability, exacerbated by the coronavirus pandemic, has prompted many to turn to online banking and financial tools.
Akrameh, who didn’t know how to invest and save money when she first started earning income, now uses an app to track her spending.
“It’s not just about retiring; it’s about living better, having dreams, having time to breathe and think,” she said.
S&P Global said in a 2019 report that indicators show that Arab Gulf countries appear to be the most ready for FinTech adoption, with the main driver being demand and a customer preference for digital banking services.
The fintech industry in the Middle East is already growing, according to the Milken Institute think tank.
It estimates that 465 companies will raise more than $ 2 billion by 2022, compared to 30 fintech companies that raised around $ 80 million in 2017.
– “The difficult path to wealth” –
Besides having some of the world’s youngest populations and the highest unemployment rates, many countries in the Middle East and North Africa rank among the lowest for long-term savers and investors. .
Only seven percent of adults in the region are saving for retirement, according to the World Bank’s 2016 “Saving for Old Age” report, the lowest of the world’s economies.
“Arabs, we have taken the very difficult path to wealth,” said Mark Chahwan, CEO of Sarwa, a Dubai-based automated financial advisory firm.
“We believe that it is our income that will enrich us instead of our capital,” he told AFP.
Most of the oil-rich Gulf Arab states, including Saudi Arabia, the largest exporter of crude, have long offered their citizens government-funded pensions.
But Saudi officials have warned the system is not sustainable, according to Bloomberg, as Riyadh tries to diversify its economy away from oil.
In addition, these pensions exclude foreigners, many of whom provide cheap labor and constitute a large part of the population in many Gulf states.
Chahwan said he has noticed a change in financial behavior over the past year, largely due to the pandemic, which has devastated many industries and saw many people lose their jobs.
He said there had been an 80% increase in new Sarwa accounts since the first quarter of 2020, with up to 45,000 wallets for people aged 25 to 45.
– Low cost investors –
Chahwan said the average user is new to the idea of long-term investment, with many Arabs still hesitant to wait for benefits later rather than quick profits.
“We don’t have an education that revolves around long-term investing,” he said, adding that the obstacle remains convincing avid investors of the benefits of deferred gratification.
Another problem is the region’s investment landscape, which is mostly confined to the so-called wealthy, typically defined as people with at least $ 1 million in liquid assets.
“If someone wanted to invest $ 1,000 or $ 10,000, there wasn’t much available,” said Haitham Juma, investment solutions manager at UAE-based National Bank of Fujairah. United.
He said low-cost investors need wealth management options with more transparency, accessibility and liquidity that will help build the region’s investment market.
“We are still in the early stages,” Juma said, as local banks and businesses seek to create online platforms that educate users and simplify investments.
Making the process easier – if not fun – is key to attracting new investors, as pointed out by Lune, a UAE-based financial platform that launched in July.
“Regardless of their age, income or experience,” Alexandre Soued, co-founder of the application, told AFP.
He added that the platform focuses on the initial stages of management, savings and then investing, and encourages them to use simple online tools.
Moon allows its nearly 1,000 users to instantly view their spending, scan to maximize their savings, and, Soued says, they’ll soon be able to compare their savings to those of others their age.
“People start to want to be more independent from a young age,” he told AFP. “And your financial situation is tied to that.”