Buna is the payment system that aims to transform the Arab world across the Middle East and Africa (MEA). But what is it exactly and how has it evolved?
Property of the Arab Monetary Fund
The Arab Monetary Fund (MFA) is a regional Arab organization headquartered in Abu Dhabi, United Arab Emirates (UAE). Founded in 1976 and beginning its operations a year later, it currently has 22 member countries in the MEA region: Algeria, Bahrain, Comoros Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates and Yemen.
According to its website, its mission and vision are to “strengthen economic, financial and monetary stability and the development process” and “to lay the monetary foundations of Arab economic integration and promote economic development in Arab countries. “.
Its main objectives include:
- Correct imbalances in the balance of payments of Member States.
- Seek to remove restrictions on current payments between Member States.
- Establish policies and modes of Arab monetary cooperation.
- Advise, whenever called upon, on policies related to the investment of Member States’ financial resources in foreign markets.
- Promote the development of Arab financial markets.
- Pave the way for the creation of a unified Arab currency.
- Regulate current payments between Member States to promote intra-Community trade.
As I have written many times, the wider MEA region is experiencing massive economic development and diversification – much of it being driven by large-scale national strategies.
This extends to much of the Arab world – from Saudi Arabia to Egypt to Qatar, Tunisia and Oman – to name a few. Visible examples of this have been the growth and development of cities as regional and global centers such as Dubai and Abu Dhabi.
So, where are fintech and digital in the broad sense? There are several examples, but a clear example with regard to the implementation of cross-border payments in the Arab world is Buna.
What is Buna?
Buna is a multi-currency payment platform launched in 2020 that clears and settles cross-border payments in eligible Arab and international currencies in the Arab region and beyond, with links to major trading partners.
It is the first regional cross-border, multi-currency payment system that supports Arab transactions in trade, investment and financial transfers.
In March of this year, Dr Abdulrahman bin Abdullah Al Hamidymanaging director and chairman of the board of the AMF, said that six currencies represent 90% of Arab transactions (the Emirati dirham (AED), the Saudi riyal (SAR), the Egyptian pound (EGP), the Jordanian dinar (JOD), the US dollar and the euro).
This is what Buna is all about – enabling financial institutions and central banks in the Arab region and beyond to send and receive payments in local currencies as well as major international currencies. By offering the various participants to participate, assuming that they respect and fulfill the criteria and conditions of participation, Buna complies with international standards, principles and compliance requirements.
As part of a broader integration of economic development across the Arab world, Buna presents the implementation of a broader vision to foster broader international trade and investment among Arab countries in the AME.
First, the AMF and Standard Chartered Bank last year in June signed an agreement that Standard Chartered will serve as the settlement bank for the euro in Buna (the cross-border payment system owned by the AMF).
At the time, according to an AMF press release, the inclusion of the euro became the fifth settlement currency (previously it was the AED Emirati Dirham, the Saudi Real SAR, the EGP and the ‘USD, the first non-Arab currency to be part of Buna).
The euro is the second most traded currency in the world after the US dollar and was expected to help further facilitate growing trade and investment flows and broader transactions between the Arab world and the European Union ( EU) and Europe as a whole.
Recently, in April this year, a workshop was held to elaborate on Buna’s preparations to begin providing cross-border euro payments services – attended by representatives of the European Central Bank (ECB), Central Bank of Egypt (ECB) and the Pan-African Payments and Settlement System (PAPSS) – to name a few.
Speaking of PAPSS – Africa’s response to tangible integration through the African Continental Free Trade Area (CFTA) – signed a memorandum of understanding (MOU) with Buna in April.
As there are currently active members of the AfCFTA and also members of the AMF such as Egypt – coupled with the historic and current broader trade and investment opportunities between the Arab world and Africa, the MoU he agreement aims to strengthen and foster collaboration between the two regions with digital cross-border payments. in this case.
In India, last March, Buna signed a memorandum of understanding (MoU) with NPCI International Payments Limited (NIPL), the international branch of National Payments Corporation of India (NPCI), to support the growth of trade and investment flows between the Arab world and India. The objective of the MoU is to implement payment solutions, ultimately leading to interoperability between their instant payment services and allowing their participants to exchange cross-border payments instantly, securely and cost-effectively at any time – according to a press release.
Finally, other partners have also joined the Buna ecosystem. For example, in January of this year, First Bank of Abu Dhabi (FOB), one of the largest banks in the Gulf Cooperation Council Region (GCC) region, improved regional cross-border payment capabilities by implementing the Buna system.
FAB completed its first Buna transaction in EGP and will participate in other currencies offered by the system as part of its adoption.
Further economic integration of a region, in this case the Arab world with Buna, can lay the groundwork for new collaborations and stimulate economic development through international trade and investment.
Time will tell, but Buna looks promising for the future in a region that is quite diverse on its own – as can be seen in the payments space.