The digital transformation megatrend can help developed countries meet their trade and investment goals in challenging conditions. This briefing digest explores how ICIEC and others are helping to bridge any digital divides in OIC and ICIEC member states.
Rapid technological advancement and digital transformation are among the five key megatrends affecting global trade and investment in the next few years, but they hinge on developing countries shifting towards a digital economy. This shift can aid better supply chain management – vital in a time of geopolitical change – and help improve transparency, combat bad practices and allow businesses to expand their reach into more remote markets. This is particularly true as the global economy attempts to bounce back from COVID-19 setbacks and geopolitical challenges. Digital technologies have immense potential to unlock enormous economic opportunities in trade, agriculture, investment, manufacturing, and services.
While the Pandemic has boosted digitization worldwide, a lot needs to be done to ensure that the gains made in the last couple of years are carried through in a post-COVID world. “Alongside advancing technology, the pandemic has also created a digital divide and inequalities,” says Oussama Kaissi, Chief Executive Officer of the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC). “For many OIC and ICIEC member states, digitization strategies remain in an embryonic stage.”
Digitization has been a longstanding goal of the ICIEC, but currently, it has amplified its investment in digital infrastructure in member states, with a sharp focus on reducing the divide between developed and emerging markets. So far this year, the corporation has provided nearly $419 million toward supporting infrastructure and $3.9 billion toward energy support, including €50 million in coverage for a telecommunications project in Indonesia that expanded access to 4G coverage from 40% of the population to 90%.
OBIC vision to fill the information gap
To foster an ecosystem of learning about digital advancement and trade technology, ICIEC, in partnership with the Statistical, Economic and Social Research and Training Centre for Islamic Countries (SESRIC), founded the OIC Business Intelligence Centre (OBIC). The vision is to develop a country-level credit reporting ecosystem (addressing four different tiers of credit maturity levels among OIC countries), improve cross-OIC credit data infrastructure, develop capability, and provide operational excellence with a sustainable business model.
The OIC member states exhibit the lowest levels of credit penetration globally, along with inadequate levels of credit reporting. Most OIC economies either have an inadequate credit reporting system or none. Credit information systems across the OIC measure far below global benchmarks. According to ICIEC CEO Mr KAISSI, OBIC will play a crucial role in mitigating this challenge by increasing OIC credit information’s transparency, reliability, and accessibility. OBIC’s mandate of delivering credit intelligence to end consumers – by way of credit reports – will help prospective trade partners and companies looking to expand into OIC countries and enable them to see the promise of doing business in such markets at a low cost.
“Data and digitalization will also drive MSME growth,” says Mr KAISSI. “MSMEs are the backbone of economies, accounting for over 50% of jobs globally and about 50% of GDP in developing countries.” OBIC will fill in the information gap that often cripples MSMEs in emerging markets. Credit data on companies, particularly MSMEs, or industries, can help drive trade, boost revenues, and drive foreign companies to invest and set up operations abroad. “Digitisation of MSMEs will also enhance financial inclusion and fill the gap between the formal and informal sectors,” says Kaissi.
To make the consumer more financially resilient and independent, digitizing access to finance is paramount. For instance, Egypt Post is working on enhancing e-commerce portals in the country in collaboration with the Central Bank of Egypt to make financial services more accessible to the youth and small businesses.
Overcoming cross-border regulatory hurdles
While technological innovation is finding unprecedented institutional, private and public investment, cross-border regulations and lack of standardization of documentation are significant impediments to technological advancements in trade. ICIEC and OIC have the potential to bring together their member states to build a cohesive regulatory framework, particularly in emerging markets.
Initiatives in Africa, such as the Afreximbank-led Africa Trade Gateway, seek to address the regulatory challenge. For example, any MSME in Egypt looking to grow its business in Africa and tap into new markets would encounter information opacity and a lack of transparency in the target markets. African Trade Gateway – an agglomeration of interrelated digital platforms – can potentially eliminate some of the challenges to intra-African trade. The focus is mainly on the complexities of payment transfers within Africa, the current low access to trade and investment information, and the costs associated with conducting Know Your Customer (KYC) checks on African entities.
The Central Bank of Egypt has a similar initiative – Regulatory Sandbox – to support technology start-ups navigating regulatory frameworks. The Regulatory Sandbox works as a live testing ground for Fintechs, developing new business models currently hindered by stringent authorization requirements and regulatory uncertainty. The Regulatory Sandbox aims to pave the way for faster and easier access to new financial solutions and embed compliance within the Fintech ecosystem at an early stage. This will not only allow Fintech innovators to focus on their core offering but also ensure that consumers and other players in the market are not adversely affected by the regulatory uncertainty of the disruptive Fintech activities.
Bringing these various initiatives together is vital for OIC countries looking to collaborate. The vision of ICIEC is to foster such networks and conversations and act as a catalyst for the digital revolution in the region.
This is a digest of a high-level panel convened by ICIEC on June 2, 2022, at the IsDB Group’s Private Sector Forum, which ran at the IsDB’s 47th Annual Meetings in Sharm El-Sheikh, Egypt. The panel had representatives from The Central Bank of Egypt, Afreximbank, Egypt Post, AlFaris International Group, Azentio Software, and DinarStandard.
You can watch the discussions in their entirety here: Digital Transformation in Support of Finance and Investment
https://youtu.be/Rf5WQaMLalc
