Bahrain Takes Leadership Role in Islamic Finance

Bahrain’s capital, Manama, and its new Bahrain Financial Harbor (BFH) are home to a booming Islamic banking and finance market that is attracting the attention of established foreign giants such as UBS Noriba, Citibank and BNP Paribas.

Image: Manama, Bahrain (ABC Head Office).

Last year, the Islamic finance industry watched profits double and net assets reach almost $50 billion. In the period beginning in1998, Islamic finance in the Middle East has grown at an annual pace 24% and net profits topped $1.3 billion last year. Bahrain—a nation of just 33 square miles and limited oil resources—ranks third in total assets invested in the financial sector behind oil-rich Saudi Arabia and Kuwait.

Since 1979, when the first Islamic bank was established in the island nation, Bahrain has been the leading center for Islamic finance in the Middle East. In the quarter century since, the sector in Bahrain has expanded to satisfy the growing wish of Muslim customers to conduct financial activities in accordance Sharia, the Islamic custom that governs banking.

In keeping with Sharia—which substitutes conventional interest rates with shared profit and loss among investors and depositors—Islamic banks provide products ranging from traditional Islamic structures (Murabaha, Ijara, Mudaraba, Musharaka, Al Salam and Istisna'a) to restricted and unrestricted investment accounts, syndications and other structures used in conventional finance.

Bahrain closely monitors and regulates the industry to comply with international standards. In 2000, the Bahrain Monetary Agency (BMA) issued a new and comprehensive set of regulations for Islamic banks that outlined rules for capital adequacy, asset quality, the management of investment accounts, corporate governance and liquidity management.

While the BMA has seen double-digit growth in licenses issued, a flood of new Islamic banks is unlikely to occur. The BMA takes its due diligence role seriously and has issued a mere two banking licenses each year since 1979.

Today, 28 Islamic financial institutions are currently licensed in Bahrain, a number that includes 5 full commercial banks, 16 investment banks and 3 offshore banking units.

Islamic Financial Institutions in Bahrain include:

• Bahrain Islamic Bank
• ABC Islamic Bank (E.C.)
• Shamil Bank
• Noriba Bank (Member of UBS Group)
• Gulf Finance House
• Albaraka Bank Bahrain
• Citi Islamic Investment Bank E.C
• Arcapita (Formerly known as First Islamic Investment Bank and Crescent Capital
• Al-Amin Bank, Bahrain

To learn more about Islamic Banking please click here to download a presentation prepared by the Bahrain Monetary Agency titled Islamic Finance: “Fastest Growing Segment of Global Banking” (PDF).

For further information, please contact the Office of the Economic Representative via e-mail info@bahraingateway.org or by telephone at (202) 537-7810.