Fintech, a new horizon

Fintech, a new horizon

It is no secret that the Tunisian economy is hanging on a knife’s edge with external debt currently exceeding the national GDP. A plethora of other various statistics could further highlight the country’s dire financial situation yet the purpose of this article is not to shed light on our doom but to shift the attention to an industry that is majoratiraly considered as one of the potential paths to our salvation. 

Fintech or Financial technology refers to, as the name might suggest, the adaptation and use of technological advancement to streamline and hone the automation of financial services. This industry is a rising star in the global economic scene with more than 1463 startups and $37.9 billion in investment in 2019. It is shapinges the way to a revolution in financial services further leading us to a cashless economy. This, in particular, is why it might turn out to be Tunisia’s elixir of life. One of the most lethal viruses to our country’s already frail economic immunity is its alternative economy or its black market. With merely 36% of the people banked, it is significantly harder for the government to keep track of the monetary transactions and combat the rising tide of smuggling.

Despite it supposedly forging a merry way to reach economic flourishment and helping the country out of a crisis, the government’s conditions for the integration of the industry in Tunisia are nothing short of debilitating. 95% of Fintech startups reported suffering from the insanely exhausting bureaucratic administrative procedures. 94% claim that the regulatory framework is equally paralysing their growth and hindering the success of their efforts to alter the status quo. The risk-averse nature of the government is also reflected in its banking enterprises regarding Fintech. Several entrepreneurs in the industry have complained from an inexplicable lack of cooperation from the aforementioned companies to partner up with Startups and make the transition to the future of banking services. 

The central bank of Tunisia, however, has become more aware of the importance of Fintech and its potential effect on the economy and so it has gathered a panel of experts to launch, in May 2020,a regulatory sandbox. The central bank has announced the website that will be dedicated to Fintech startups in a new effort to streamline the banking process.

In layman’s terms, a regulatory sandbox is a virtual tool that attempts to build an environment, a model in which Tunisian Fintech startups can experiment their ideas with loose regulations and little to no risk. Several startups such as Kaoun and SQoin have already enrolled and been accepted in the sandbox.

The CBT has been influenced and encouraged by the Kenyan experience with M-Pesa. M-Pesa, in simple terms, is a bank account in your sim card. Partnering with the country’s leading mobile service company, Safaricom, M-Pesa achieved financial inclusion for unbanked citizens and allowed them to send and receive money through a mobile application. Another significant African example is that of Zimbabwe. The sub-Saharan country was on the brink of economic collapse. With an inflation rate napping at the stars, its last resort was EcoCash. A mobile application that allows you to, literally, text money with very minimal fees and no bank account required thus reducing the amount of cash circulating in the economy and bringing inflation back to earthly prosperity.

Fintech enthusiast and CEO of Ventures01, Selma Ribica, stated that the two essential elements to the aforementioned success story in Kenya are simple and applicable in Tunisia. First, the government needs to follow a “risk-based approach on capital requirement”. In layman’s terms, it must allow startups and SMEs to launch their businesses and then regulate them according to their return volume. Moreover, Tunisia must build the right track to democratize the distribution of money so it can build a system where every Tunisian Dinar is accounted for and every taxpayer delivers his/her dues.

Kaoun, a Tunisian startup in the Fintech industry, is following the tracks of the giants by trying to solve the issue of unbanked citizens in Tunisia which, as previously mentioned, constitute a whopping 64% of the adult population. According to its co-founder and CTO, Rochester graduate Anis Kallel, Kaoun’s problems revolve around the barriers to entry in the financial sector because of several reasons that I will sum up in the following.

 First, the market is just not ready to make the transition from its habits and traits of daily transactions to a new, more technologically sophisticated system. Furthermore, the infrastructure is simply not there. Mr. Kallel states that Kaoun had to “overbuild” its products to cement the holes and flaws of the feeble infrastructure. Despite all the hindrances and hardships, Kaoun has launched its first product, Flouci.

FLOUCI is an e-wallet that allows unbanked citizens to create bank accounts and sign contracts online. Users can then transfer and receive money through the application using a blockchain infrastructure that enables people with different banks to exchange money in cycles of 4 seconds.

At TIMUN, your safety is our priority. After consideration of the current dire sanitary situation in the country, we decided to partner up with Kaoun to allow you to pay your simulation fees through FLOUCI thus saving you the trouble of in-person payment. 

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