Fintech Rulemaking: Evidence from Middle East and Africa

Abstract

In recent times, there has been a flurry of fintech policymaking across the Middle East and Africa (MEA) region. This chapter studies fintech rulemaking processes across the MEA region. Earlier research has described responses to fintech as (a) Wait and See, (b) Test and Learn, (c) Innovation Facilitators (includes regulatory sandboxes, innovation hubs, and accelerators), and (d) Regulatory Laws and Reform. This chapter is about the regulatory reforms with theoretical foundation in policy diffusion and administrative process. The author extends an emerging scholarship on administrative process theory of central banking. The author asserts fintech policies began with initial guidance from multilateral development banks (World Bank, IMF, UNECA, UNCDF), global standard-setting bodies (Basel Committee on Banking Supervision, Financial Stability Board), regional organization (Arab Monetary Fund), and collaborative network (Alliance for Financial Inclusion). Over time, MEA nations developed their fintech-specific regulations.The author used a self-gathered private dataset of fintech rulemaking processes across the MEA region, the World Bank Global Fintech-enabling regulations database, and the World Bank’s Global Indicators of Regulatory Governance (GRG). From the data analysis, the author’s findings led to three conceptual frameworks: (i) solicitation, (ii) engagement, and (iii) custodianship.Solicitation refers to when financial regulators (central banks, securities regulators) ask for input from the public. Engagement could take any of these form cooperation and collaboration. It refers to activities that keep regulators and the public to interact as well as help improve fintech regulatory decision-making. Lastly, custodianship explores the prerogative role held by financial regulators to guard, protect, and maintain financial inclusion, stability, integrity, and protection (I-SIP) of the financial system.