Q: The Qatar Central Bank (QCB) launched its National Fintech Strategy in March. How will this contribute to the development of Qatar’s fintech ecosystem?
A: The National Fintech Strategy is built on a four-pillar approach to the development of fintech in the country. The pillars include establishing pioneering infrastructure, prioritising innovation and growth with a focus on Islamic finance and sustainable technology, developing human capabilities related to financial technology, and leveraging fintech technology for broader societal benefits.
QCB has more than 20 initiatives planned over the next five years as part of the Fintech Strategy. The initiatives include the development of a new framework and regulations to support the fintech ecosystem and enable firms to test emerging technologies through the regulatory sandbox. The strategy will facilitate innovative products and services in the financial services industry, offer efficiency and cost savings by leveraging digital tools, foster an enhanced sense of transformation and digital maturity at institutions, nurture talent both locally and from abroad, provide greater employment opportunities, and maintain the competitiveness of Qatar both regionally and globally.
Q: What regulatory changes can be expected as a result of this strategy?
A: We are looking to implement enhancements to our regulatory frameworks for the banking and insurance domain to support fintech. The idea is to evaluate the emerging business models and assess their relevance and benefits to the state of Qatar.
The new draft of regulation guidelines addresses both vertical and horizontal aspects of our regulatory framework. The former caters to areas such as loan-based crowdfunding, insurance technology such as price-comparison websites and digital banking, and the latter focuses on areas such as e-KYC, cloud computing, data protection and privacy.
In order to provide a supportive regulatory framework for innovative and fintech firms, the QCB is also exploring establishing channels for stakeholder engagement. For example, collaborating with other strategic stakeholders in the state of Qatar on enhancements to the regulatory framework, consulting in a focused manner with industry stakeholders on draft regulations before finalisation, and a structured model for ongoing stakeholder engagement that would include frequent meetings and feedback mechanisms to ensure a thorough understanding of industry and market developments.
Q: What steps is the QCB taking to evaluate the need for a central bank digital currency (CBDC)?
A: [The issue of] CBDCs is one that is being extensively studied by central banks worldwide and QCB is no exception to this. After thorough research, QCB is exploring the possibility of shortlisting companies to develop the proof-of-concept which would initially focus on a wholesale CBDC and then potentially expand the scope over time.
Q: In what ways is the QCB supporting the growth of the Islamic finance sector?
A: Islamic finance is an important and prominent segment of the country’s financial system. Close to 30% of the banking system is Islamic and likewise, takaful accounts for nearly 21% of the gross written premium by insurance institutions in the country. As the regulator of the banking and insurance sector, QCB prioritises the implementation of best practices at financial institutions and Islamic institutions in particular.
Given the importance of liquidity to stability and growth, QCB launched new sharia-compliant instruments in March 2023 to facilitate proactive liquidity management by Islamic banks.
Islamic finance is an important focus for the QCB and that fact is reflected in both its domestic and international agenda. QCB is a steering committee member of international standard-setting bodies for Islamic finance and as the major shareholder in International Islamic Liquidity Management Corporation [IILM], QCB has helped in developing and issuance of short-term sharia-compliant financial instruments to facilitate effective cross-border liquidity management. Qatar’s banks are also active participants in the IILM’s sukuk programmes.
Q: What are your expectations for Qatar’s economic growth in 2023?
A: In 2022, real gross domestic product growth was 4.8% driven by growth in both hydrocarbon and non-hydrocarbon sectors. This level of growth is among the highest we have recorded in the past several years. The OPEC+ production cuts are expected to ensure a strong oil price for the remainder of this year. While this will provide a boost to the hydrocarbon sector and, in turn, support the non-hydrocarbon sector as well, this positive needs to be weighed against the policy rate hike by major central banks, including Qatar, which could affect growth. We expect growth to be around 2.5% to 3% for 2023.
