How Dubai’s IFC became a startup ecosystem, lessons Nigeria can learn

Dubai International Financial Centre (DIFC), a financial hub in the Middle East, Africa, and South Asia (MEASA) area and one of the top ten (10) worldwide financial centres fostering business and cultural growth holds lessons for Nigeria’s startup ecosystem.

With over 5,000 active registered firms and about 40,000 professionals operating within a thriving business ecosystem, the centre offers a strong independent judicial system, a global financial exchange, creative architecture, and enabling support services that embody Dubai’s startup community.

The DIFC based on common law, has its financial regulator and was created to become an international platform for financial institutions to assist businesses and startups in obtaining financial and regulatory frameworks in Dubai.

The institution has three different bodies, which include the Dubai Financial Services Authority (DFSA), which are the licensing regulators: The DIFC courts, an independent English language common law judiciary, based in the DIFC with jurisdiction governing civil and commercial disputes nationally, regionally and worldwide and the DIFC authorities, which are responsible for strategic development, business development, etc.

In 2015, when startups began shaping the finance industry and taking over the industry, the DIFC became a jurisdiction for startups. However, to fully adjust to the growing demand of these startups the DIFC came up with initiatives that fully positioned the financial regulatory as a house for startups.

Mohammad Al Blooshi, chief executive officer, DIFC Innovation Hub, during a media session with 22 selected journalists in Dubai disclosed that one of its initiatives was the fintech hive.

He said, “We recongised that space and branded it to what it is today, our first move was how to attract these fintech companies to the IFC and connect them with financial institutions.”

“Our continuous attempt to work on initiatives and products brought us this far, however, one thing we realised early is that we can’t treat fintechs the way we treat banks not only from a regulative perspective but because they are separate entities. Fintech wants everything but they don’t want to pay for it, we thought of how to support them during their early days then we came up with incentive plans.”

“We created a working space for them for the first time and curated licensing offers, since then, we’ve always seen this growth year on year. I think, in 2018, we had about 30 companies, and then every year the numbers have significantly increased,” Blooshi disclosed.

He added that the DIFC established a venture capital fund ecosystem called the Dubai Future District Fund, through which it takes equity positions, and also attracted more VCs willing to be part of this ecosystem.

“We also take it upon ourselves when it comes to corporate innovation, how do we ensure financial service institutions are innovating and they are ready for the future. We started different programs like hackathons, corporate venture capital strategies and infrastructure building and accelerator programs to scale,” he said.

To position the DIFC as a global hub for innovation, Blooshi stressed the need for creating more specialise support for startups, recognising their critical role in advancing the ecosystem.

He added that when artificial intelligence emerged fully, the DIFC dedicated an ecosystem for artificial intelligence and came up with the Dubai AI campus which is the dedicated ecosystem for AI companies.

“By 2028, we aim to have more than 500 AI companies and a dedicated facility for the AI campus as well,” Blooshi added.

Dubai’s commitment to AI is evident in its strategic initiatives, supportive regulatory environment, and thriving innovation ecosystem.

On his part, Justin Baldacchino, managing director, supervison at the DFSA, explained that after the innovations and strategies are been put in place by the DIFC, the DFSA, which is the regulatory body in charge of licensing and framework ensures that these startups are equipped with the right license and financial information.

“We are a fully independent regulator for all financial services conducted in or from the DIFC, the DFSA administers laws and regulations that are tailored made, and based on common laws. However, the UAE civil and commercial laws do not apply while criminal law does. So if you do something wrong, you’ll be tried the same way through the same court system,” he said.

He added that the DFSA takes a risk-based approach, they assess the risk associated with new technologies entering the market and determine whether regulation is necessary. In some cases, the technology may not require regulation, while in others, it may trigger the need for a regulatory license. The DFSA makes this determination as part of its overall regulatory process.

“Our goal is to create a regulatory framework that encourages the responsible development and adoption of AI technologies. We believe that by fostering innovation, we can drive economic growth and improve the lives of our citizens,” Baldacchino said.