Dynamic Financial Services Base

As the GCC’s financial capital, Bahrain is home to a robust and progressive financial services sector populated by more than 400 local, regional and global financial institutions. For over 40 years the sector has been guided by the Central Bank of Bahrain (CBB), which fosters a solid and healthy regulatory environment.

The financial services sector is the largest non-oil contributor to Bahrain’s real GDP and it continues to grow with international financial institutions keen to source better, more efficient and cost-effective ancillary services solutions.

The Bahrain market provides many attractive advantages, some of which include competitive operating costs and a deep pool of skilled and trained local talent.

Notably, the nation is considered to be the most experienced in Islamic Banking in the region, placing it squarely at the centre of the Islamic financial services industry globally. In fact, for the past five years, Bahrain has stood second only to Malaysia, among all global players in the Islamic financial services industry, according to the Thomson Reuters 2017 Islamic Finance Development Report.

With a forward thinking government, Bahrain leads the GCC in nurturing the exponential growth of digital services and their efforts to transform the country’s financial services sector. Banks in Bahrain have moved swiftly to embed state-of-the-art mobile, eLink, and video-streamed services within their offering, all for the benefit of the consumer.

Meanwhile, a move to embrace the FinTech industry with the development of Bahrain FinTech Bay elevates the country. Bahrain will have the largest FinTech hub in the MENA region, which will provide a complete offering for corporate and individual FinTech innovators.

Some notable companies that have invested in the Financial Services sector in 2017

Regulation and Legislation

As innovation flourishes, Bahrain is mindful of the need to simultaneously review the appropriate legislation and regulatory supervision requirements, to maintain and strengthen the financial ecosystem.

FinTech Regulatory Sandbox

The CBB is directly supportive of several supervisory areas, including the formal creation of the FinTech Regulatory Sandbox. It provides a virtual space for existing CBB licensees and other local and foreign investors to test their technology-based innovations without the burden of heavy regulations and licensing.

Cloud Computing

Bahrain acknowledges that the pace of technological innovation in all areas of the economy is rapid and irreversible, and chief among these developments is cloud computing. The financial services sector recognises the need to stay one step ahead of these changes or risk losing out to competitors.

Therefore, the CBB has adopted regulatory changes that allow the use of cloud technology for the sector, and specifically, enabling local and foreign banks to upload data to the cloud. While doing so, the financial services sector will benefit from the most advanced security protocols and protection of data, quelling a major concern for the sector in a digitised world.

Crowdfunding Regulations

Bahrain introduced Crowdfunding Regulations that permit access to loan financing and a range of alternative equity-based financing opportunities for FinTech investors, SMEs and startups, beyond the traditional banks. Equity-based funding offers the attraction of a larger pool of investors to finance startups and smaller businesses in return for equity participation. Doing so minimises overall risk and makes funding more affordable. A Shari’a-compliant option is an important feature of the law, as crowdfunding methods are at the foundation of Islamic Finance.

Shari'a Governance

The CBB has introduced a new Shari'a Governance module, which will come into play on June 30, 2018. The proposed legislation will apply to all Islamic wholesale and retail banks across the Kingdom.

Building on the module, Bahrain intends to establish industry-leading governance principles and will lay the groundwork for proper benchmarks of international Shari’a Governance standards. For Islamic Banks in Bahrain, this will lead to even higher standards of transparency, governance, and competence, thus adding to the protection of investors and other stakeholders.