Wednesday, May 30, 2012

MENA: a fertile ground for entrepreneurs to flourish

                                   Oasis 500: a leading start-up incubator based in Jordan                       

Global trade & commerce are undergoing rapid transformation. In this newly integrated & globalized world, a new wave of change is being witnessed across various regions & geographies. Equipped with education, technology & better credit – a new generation of entrepreneurs are emerging across the globe. One of the regions, which have made strides in the given direction, is Middle East & North Africa (MENA) - a region traditionally known for oil revenue.  In the recent past, it had witnessed a lot of young entrepreneurs coming up with new game changing ideas.

Though entrepreneurial culture is in its initial phases, its overall economic & social significance is expected to undergo a rapid escalation, in the near future. This expected escalation- could be explained with the help of inherent strengths – associated with the social-economic & demographic structure of the region. MENA has some unique features that make it a fertile ground for entrepreneurs to flourish. The given analysis will discuss some of the features in details.

 Common Language
One of the biggest strength of the region is the usage of a common language. Arabic is used for communication across the region. A single language coupled with common cultural heritage, makes the entire region an integrated market. A successful business concept in one country could be successfully replicated across other countries as well.

Strategic Location

MENA’s geographical position is a bridge head between the East & West. This makes it a suitable ground for expats to come from different parts of the world- Europe, China, Indian Subcontinent, and South East Asia etc. For instance UAE is home to 206 different nationalities. This ensures confluence of diverse & innovative ideas providing intellectual capital.
Favorable strategic location of MENA region can also ensure access to bigger emerging markets such as Europe, India & China.
 Strategic plans & initiatives
 MENA economies are realizing the importance of economic diversification. Across the region , ambitious plans such as Dubai 2015, Abu Dhabi 2030, Qatar 2022  etc are being rolled out.
These plans are aimed at diversification of economies into various sectors such as – tourism, ICT, heavy industries, real estate’s & SME etc. A common feature across all such plans is to support entrepreneurs by providing financial as well as intellectual support. Once being realized, these plans can be very impactful in driving an entrepreneurial culture throughout the entire region.
Along with such ambitious strategic plans there are also a large number of initiatives such as – Oasis 500, Wamda, Khalifa Fund, SME Evolution, YallaStartup etc. These initiatives are aimed at providing across the spectrum services to Start Ups & SMEs such as funding, incubation, consultancy & training etc.

Young Demographics

Across the MENA region, population is heavily skewed towards the youth. In Gulf Cooperative Council (GCC) countries, 60 % of the population is aged below 35. Similarly in Egypt & Tunisia youth constitutes a large part of the population. Youths are generally open to new ideas & quickly adopt new technologies. Hence a young demographic is conducive for the growth & development of entrepreneurship.

Foreign Universities

Foreign universities are expanding rapidly in the MENA region. For instance Doha Education City, Qatar is home to some of the best educational institutes such as Carnegie Mellon University, Texas AM University, Virginia University etc. Similar expansions are happening in places such as KSA & UAE. Countries like Jordan has witnessed emergence of top quality local universities imparting level of education similar to their Western counterparts. Together, they are expected to exalt the level of education to new heights. This will eventually groom a lot of individuals for innovation based entrepreneurship.

High Mobile Penetration

The entire region is marked with high mobile penetration. According to ICT Statistics Newslog by the end of 2012, in Middle East alone, the number of mobile subscription will pass 250 Millions. The average mobile penetration rate is also expected to cross 100%. In the richer GCC, people tend to have multiple handsets, leading to a 100% plus penetration. According to research conducted by “Alexandra Tohme” from Ogilvy- high percentages of users are inclined towards buying applications & surfing internet from their handsets. More on this can be found over here- Smart Phone Users Research. 
Such factors make MENA region an optimum place for mobile & web technologies based companies to flourish.

This is surely an interesting phase for various MENA start ups & business ventures. Governing authorities, individuals & consumers, all are willing to experiment. Due to their collective efforts, the region has witnessed many successful start-ups in the recent past such as- Jabbar Internet Group, Net Advantage, Maktoob, Nahel & Brick 2 Click  etc. But much more is required to be done. The whole affair is not insulated from challenges. Many of the countries, both in the Middle East as well Maghreb region are undergoing political transitions – a situation which at least in the short run may not be very conducive for start-ups to flourish. Literacy levels are high in many of the countries; but a lot of reforms are required to streamline existing education system with job market. Above all one of the impending challenges for many of the nations is to provide employment to a huge young population ready to join the job market soon.

Eventually solution for such problems lies in the development & encouragement of entrepreneurship across the region. This will not only result in wealth & job creation but also transparency & knowledge creation.

Source: Wamda, ICT Statistics, Insights- Mena, The next web

Image Source: LAURI’S BLOG

Wednesday, May 2, 2012

Analysis of Mobile Payment in MENA

All around the globe, mobile phones have become an integral part of our daily lives.  There are presently 5 Billion mobile phone users across the globe. The role of a handset is not just restricted to talk. It is being used for diverse purposes- text messages, photographs, surf, social network, multi media consumption etc. Another area, where mobiles have made headway in the recent past is payment. Usage of mobile devices to, transfer money or make purchases are mounting up across the globe. The emergence of sophisticated smart phones has given it a further boost. Presently there are 1.08 Billion Smart Phones users around the world.  M-commerce- as it’s commonly known- can be done either by linking the handset to the bank account or by simply topping up. The later part is more popular in many of the emerging economies in Asia, Africa & Middle East- regions marked by high mobile penetration but low penetration of bank accounts.

Fig 2: shows the growth of Mobile-payment or M-Payment over the last ten years in us $ billions. Source: Inter Bank Financial service infographics.

Types of mobile payment

·         Mobile as a point of sale: with the help of a dongle, merchant’s mobile phones can be used for processing credit card payments.

·         Contactless payment: works on the NFC technology. NFC, or near field communication is set of protocols, which allow smart phones to communicate with each other or other devices, with in a very small distance. Credit card info or some other loyalty program info could be loaded into the mobile phone – which could be eventually used for making the payment at the point of sales.

·         Direct Carrier billing: phone number is shared with the merchant & the charge appears on the mobile bill. Is costliest among all the existing solution, but ensures a very high degree of security. It’s used more in selling digital goods & applications.

Table 1: Shows the list of various companies active across various types of Mobile payment. Source:

Major Players involved in M-Payment

·         Payment processing network companies- companies like Visa, MasterCard & American Express are digitizing their wallets. They are also collaborating with device manufacturers to develop NFC enabled mobile payment.

·         Banks: with the help of mobile phones, banking operations such as balance inquiry, payment & transfer of money can be done over the mobile phone. The initial form of Mobile Banking, initiated via SMS was known as SMS banking. Advent of better technologies eventually lead to advance version such as WAP & web based banking. This further graduated to installation of advanced banking application on the mobile phone. These applications ensure better user interface & experience, enhanced security & pre stored user data.

·         Technology startups- lot of application developers & technology startups such as- Square, Zong are emerging with high end technological solution, designed for the mobile payment landscape. Some of the leading players are as follows –

a)  had developed an application to process credit card payments through phone. One needs to hold the credit card up to the phone. The camera in the phone will read the details in the card & authenticate the payment without involving any typing.
b)      Zong: a carrier billing solutions, where the phone number is shared with the merchant & the charge appears on the mobile bill.
c)      Square: are dongles attached to the merchant’s smart phone our tablet & can process credit cards.

·         Network Operators- operator led money transfer can be an additional source of income for operators. It can be implemented either by linking the network with a bank account of credit card or with the help of top ups. The top ups do not require existing bank accounts.

·         Web Companies- web giants like Google are also entering into the rapidly evolving market of mobile payments.
Present industry scenario

As discussed, due to the increase in popularity of M-commerce, many big financial institutions, web companies, payment companies, application developers are jumping on the bandwagon.  Visa has made strategic investment in Square (mentioned above)- a mobile payment platform.  Google has launched “Google Wallet”- a mobile payment system. The 3 giants in USA- AT&T, Verizon & T-Mobile have joined hand to incubate ISIS- a mobile payment space, expected to be piloted in mid 2012. PayPal has acquired mobile payment provider Zong (mentioned above) for US $ 240 Millions.
Fig 3: shows figures for credit card & mobile payments. Source: Visa 2011 annual report. Values are in US $ billions.

Mobile Payment in the Mena region

Middle East & North Africa Region (MENA) is one of the most fertile grounds for Mobile Payment. It basically has two types of market base-

·         High end customers residing in Gulf countries & other parts of the region, with sophisticated smart phones & high disposable income.  

·         Unbanked individuals which includes vast population in North Africa & Levant as well as expat workers living in GCC.  They can use mobile phones for money transfer, remittances & payment. Mobile technology in convergence with financial institutions & network operators can be a very effective tool for financial inclusion. Such model has been extremely successful in Kenya in the form of M-Pesa & requires neither a sophisticated handset nor a bank account.

Advantage Middle East & North Africa

·         High mobile penetration: MENA has an overall mobile penetration of around 90%. By the end of 2012, it’s expected to see 250 Million mobile phone subscriptions. By 2016, additional 100 Million phone subscriptions are expected to be added. In terms of volume Iran is the biggest market, followed by Saudi Arabia. 

Fig 4: Shows mobile penetration for some of the selected mena countries. (Multiple handsets have not been considered). Source: Insights Mena  

·         Expat Work Force: In Gulf countries, a large percentage of population comprises of expat population- large no. of which are part of industrial work force. A large volume of remittances are send through them. Saudi Arabia itself witnesses an annual outflow of US$ 100 Billion as remittances. Mobile payment can be a suitable option for money transfer as well as payment, for such workforce- given the fact that many of them do not have bank accounts. 

·         Users comfortable purchasing through mobile phone: In MENA region people are credit card shy. Cash & carry culture predominates over credit cards. Fortunately it goes off the mark, in case of mobile payment. A research conducted by Plus 7 on 4000 smart phone users in the region, shows that individuals intend paying by their mobile phones. 

Fig 5: shows the percentage of respondents for various countries; comfortable purchasing products on their phone. Source: Plus 7. 

Other than the above factors, there is lot of other factors- conducive for the growth of Mobile Payments in the MENA region. One of them is the young demography in the MENA region. A vibrant younger population ensures quick adoption of newer technologies.
Given the fact that MENA is a fertile ground for Mobile Payment, many companies, across the globe are entering or planning to enter in to the market. Some of them are Mi-Pay, Mobibucks, and Gemalto etc. The given list table shows, some of the companies –

The unique socio-economic factors, coupled with the young demographics in the region makes the MENA region optimum for M-commerce & M-payment to flourish. Many consumers have jumped directly from cash payments to mobile payments, by passing the credit card mode. For many merchants, inclusion of a M-payment system is not just optional but indispensable. But there are some bottlenecks as well. Not all local banks are well equipped to provide M-Payment gateway. There is also, a very serious dearth of local Arabic applications. A lot more needs to be done to consolidate MENA as a strong base of M-Payment. In order to realize this- network operators, technological solution provider, financial institutions & regulators- all need to work in convergence.

Source: Read Write Web,, Mashable, Digby, IBFS, Zawya, Wamda, DailyMenadeals, Thenextweb,  Zawya, Wamda, Insights MENA, Venture beat.
Image Source:
 Table 2: shows some of the M-payment providers in the region. Source: Zawya, Wamda