After about three years since it formed an alliance with Kuwait’s leading telco provider to establish a digital banking platform, Boubyan Bank has withdrawn itself from the race for an Islamic digital bank license.
In a bourse filing, the Islamic bank confirmed that it has pulled itself out of the digital bank consortium, while Mobile Telecommunications Company (Zain) will continue with the existing application for a Central Bank of Kuwait (CBK) digital bank license, along with a group of other investors.
“It is worth noting that the relationship between Zain and Boubyan Bank will continue in accordance with their other strategic plans,” the bank noted.
To recap, Boubyan Bank and Zain in October 2019 entered into a partnership to jointly seek the approval from the CBK to build Kuwait’s first digital bank. The collaboration was a promising landmark agreement for the Islamic banking sector as it brought together an Islamic bank with a regional telecommunications company serving over 50 million active users across the Middle East.
CBK introduced guidelines for digital banks in February last year and subsequently opened applications for the licenses until the end of June 2022. It had expected to grant initial approvals by the end of last year. It is understood that the regulator is looking to license two digital banks.
At least three consortiums are eyeing for a license: with Boubyan out of the race, it is not yet clear if Zain, if approved, would operate the digital bank in full compliance with Shariah principles. However, rival telco Ooredoo Kuwait joined hands with Warba Bank and the Kuwait Investment Company and Al Manar Financing and Leasing Company to form a consortium, and considering that Warba Bank is a fully-fledged Islamic bank, it is most likely the proposed digital bank would too. Kuwait and Middle East Financial Investment Company also formed an alliance with unnamed investors. It is also understood that several standalone entities have applied for the license.
While there has been no indication as to who would be successful, it is highly likely that there would be at least one Islamic digital bank in Kuwait in the form of Ahli United Bank (AUB). The Bahrain-headquartered lender was formally acquired by Kuwait Finance House-Bahrain in October last year which will see all of AUB’s businesses converted to comply with Shariah principles; and the CBK had requested for AUB’s Kuwaiti subsidiary to be transformed into a digital bank.
CBK is aggressively pushing forward with its digital agenda as its neighbors leap forward to capitalize on the digital revolution and jostle for fintech supremacy in the GCC. Both Saudi Arabia and the UAE have licensed digital banks.
Although Boubyan Bank is no longer pursuing a digital bank license as part of a consortium, it does not necessarily mean this is the end of its digital journey. The Islamic bank continues to invest heavily into fintech and digitalization: it partnered with DIFC Fintech Hive to introduce a fintech accelerator program last year and in 2021, at a group level, it launched Nomo, a regulated UK Islamic digital bank under Bank of London and The Middle East, in which it is a majority shareholder.