Trade Financing⁽¹⁾

Bahrain’s financial sector is well-developed and diversified, consisting of a wide range of conventional and Islamic financial institutions and markets, including retail and wholesale banks, specialized banks, insurance companies, finance companies, investment advisors, money changers, insurance brokers, securities brokers and mutual funds. The sector is therefore well-positioned to offer a wide range of financial products and services.

The sector is regulated and supervised by the Central Bank of Bahrain (CBB) (formerly Bahrain Monetary Agency), which since 2002 has functioned as the single regulator for the entire financial system.

Bahrain’s banking system consists of both conventional and Islamic banks and is the largest component of the financial system, accounting for over 85% of total financial assets. The conventional segment includes mainly 29 retail banks, 73 wholesale banks, and 8 representative offices of overseas banks.

Islamic finance

In recent years, Bahrain has rapidly become a global leader in Islamic finance, playing host to the largest concentration of Islamic financial institutions in the Middle East. Presently, there are 20 Islamic banks with total assets amounted to 31.4 billion USD (in Nov 2019).⁽²⁾

In addition, Bahrain is at the forefront in the market for Islamic securities (sukuk), including short-term government sukuk as well as leasing securities.

The growth of Islamic banking has been remarkable, with total assets in this segment jumping from US$1.9 billion in 2000 to US$25.7 billion by December 2016, an increase of over 12 times. The market share of Islamic banks correspondingly increased from 1.8% of total banking assets in 2000 to 13.3% in December 2016.

The Central Bank of Bahrain has installed a comprehensive prudential and reporting framework, tailor-made for the specific concepts and needs of Islamic banking and insurance.

In addition to the numerous Islamic financial institutions active in its financial sector, Bahrain also plays host to several organizations central to the development of Islamic finance, including:

• the Accounting and Auditing Organization for Islamic Financial Institutions (‘AAOIFI’).

• Liquidity Management Centre (‘LMC’).

• the International Islamic Financial Market (‘IIFM’).

• the Islamic International Rating Agency (‘IIRA’) and

• Shariya Review Bureau.

The Central Bank of Bahrain has also recently established a special fund to finance research, education and training in Islamic finance (the Waqf Fund); and is active in working with the industry and stakeholders in developing industry standards and the standardization of market practices.

As per the Central Bank of Bahrain, the banking industry contains of:⁽³⁾

• Total Assets: 205.5 billion USD (as of Nov.2019)

• Number of Financial Institutions: 376 (as of Jan.2020)

• Total number of banks (including Islamic): 94 (as of Jan.2020)

• Retail banks: 31 (as of Jan.2020)

• Number of locally incorporated banks: 14

• Branches of foreign banks: 17

• Wholesale banks: 63

• Representative offices: 8

^{(1) Bahrain Association OF Banks (BAB) portal}

^{(2) As per the Central Bank of Bahrain}

^{(3) As per the Central Bank of Bahrain}