Buna is the payment system that aims to transform the Arab world across the Middle East and Africa (MEA). But what exactly is it and what have been its developments?
Owned by the Arab Monetary Fund
The Arab Monetary Fund (AMF) is a regional Arab organisation and is headquartered in Abu Dhabi, the United Arab Emirates (UAE). Founded in 1976 and commencing operations a year later, it currently has 22 member countries across the MEA region: Algeria, Bahrain, Comoros Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, UAE and Yemen.
According to its website, its mission and vision is to ‘strengthen economic, financial and monetary stability, and development process’ and ‘to lay the monetary foundations for Arab economic integration and promote economic development in Arab countries.’
Its key objectives includes:
- Correct disequilibria in the balance of payments of member states.
- Strive for the removal of restrictions on current payments between member states.
- Establish policies and modes of Arab monetary cooperation.
- Render advice, whenever called upon to do so, with regards to policies related to the investment of the financial resources of member states in foreign markets.
- Promote the development of Arab financial markets.
- Pave the way towards the creation of a unified Arab currency.
- Settling current payments across member states to promote intra-trade.
As what I’ve written about many times, the wider MEA region is undergoing massive economic development and diversifications – many of which are being led by large-scale national strategies.
This spans across much of the Arab world – from Saudi Arabia to Egypt to Qatar to Tunisia to Oman – to name a few. Visible examples of this have been the likes of the growth and development of cities as regional and global hubs such as Dubai and Abu Dhabi.
So where does fintech and wider digital come to this? There are various example but a clear one with respect to implementation with 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 across the Arab region and beyond, with links to major trade partners.
This is the first regional cross-border and multi-currency payment system that supports Arab transactions in trade, investment and financial transfers.
Back in March this year, Dr. Abdulrahman bin Abdullah Al Hamidy, director-general and chairman of the board of executive directors of the AMF said six currencies account for 90 per cent of Arab transactions (Emirati Dirham (AED), the Saudi Riyal (SAR), the Egyptian Pound (EGP), the Jordanian Dinar (JOD), the US Dollar and the Euro).
This is the aim of Buna – to enable financial institutions and central banks in the Arab region and beyond to send and receive payments in local currencies as well as key international currencies. By offering the various participants to take part, assuming they comply and meet the criteria and conditions for participation, Buna conforms with international standards, principles, and compliance requirements.
As part of a wider economic development integration across the Arab world, Buna showcases an implementation of a wider vision to foster wider international trade and investment between Arab MEA countries.
Key developments
First, The AMF and Standard Chartered Bank last year in June signed an agreement whereby Standard Chartered will serve as settlement bank for the Euro in Buna (the cross-border payment system owned by the AMF).
At the time, according to a press release from the AMF, the inclusion of the Euro became the fifth settlement currency (prior it was the AED Emirati Dirham, Saudi Real SAR, EGP and the USD, the first non-Arab currency to be a part of Buna).
The Euro is the world’s second most traded currency after the US Dollar and it was projected to help further facilitate the growing trade and investment flows and wider transactions between the Arab world and the European Union (EU) and Europe as a whole.
Recently in April this year, a workshop was done to elaborate on Buna’s preparations to start the provision of cross-border payments services in euro – which was attended by representatives of the European Central Bank (ECB), Central Bank of Egypt (CBE) and the Pan-African Payment and Settlement System (PAPSS) – to name a few.
Speaking of PAPSS – Africa’s answer to tangible integration via the African Continental Free Trade Area (AfCFTA) – has this April signed a memorandum of understanding (MOU) with Buna.
As there are current active AfCFTA members and also AMF members such as Egypt – coupled with the wider historical and current trade and investment opportunities between the Arab world and Africa, the MOU looks to further boost and foster collaboration amongst both regions with digital cross border payments in this case.
Across to India, this past March, Buna signed an Memorandum of Understanding (MoU) with NPCI International Payments Limited (NIPL), the international arm of National Payments Corporation of India (NPCI), to support the growth of trade and investment flows between the Arab world and India. The aim of the MOU is to implement payment solutions, ultimately leading to interoperability between their instant payment services and allow their participants to exchange cross-border payments in an instant and secure and cost-effective way at anytime – according to a press release.
Finally, other partners have also joined the Buna ecosystem. For example, in January this year, First Abu Dhabi Bank (FAB), one of the largest banks in the Gulf Cooperation Council Region (GCC) region, has enhanced regional cross-border payments capabilities by going live with 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.
The further economic integration of a region, in this case the Arab world with Buna, can set a foundation for further collaborations and boosting economic development through international trade and investment.
Time will tell but Buna looks to be promising for the future in a region that is quite diverse in its own right – as can be seen in the payments space.
