Financial Services

An Expert's View about Banking, Finance and Insurance in Bahrain

Posted on: 2 Dec 2012

Bahrain is viewed as one of the best regulated financial services centres in the Gulf and has led the Middle East in a range of sectors from banking to Islamic finance.

Financial Services in Bahrain Bahrain is viewed as one of the best regulated financial services centres in the Gulf and has led the Middle East in a range of sectors from banking to Islamic finance. Consistently ranking as one of the freest economies in the world, Bahrain continues to be of interest to the UK financial services industry with many UK firms already set up. Market overview Bahrain is one of the UK’s smallest export markets in the Gulf countries and is a major trading hub and financial centre in the Middle East. Strategically located in the Northern gulf, Bahrain has good transport links to Saudi and is widely known as the ‘Gateway to the Gulf’ because of its proximity to the other GCC countries. Bahrain boasts the most diversified economy in the Gulf, with significant benefits to foreign companies such as allowing 100% ownership in 95% of private sector activities with no ‘free zone’ restrictions. In addition, Bahrain has a double tax agreement with the UK. Bahrain’s labour productivity level is also rated as the highest in the Gulf as it has the most educated and skilled workforce in the region. Bahrain also has the longest track record of business in the region with one of the most open and liberal economies in the Middle East and the world, and is recognised as having strong and effective regulation in Financial Services & other sectors. Key opportunities There are opportunities for UK companies in Islamic finance, asset management, insurance, education and training and capital markets sectors. Islamic Finance As the regional centre for Islamic finance, Bahrain is experiencing unprecedented growth in Islamic banking, Takaful and Sukuk issuance. Research revealed that the Sharia compliant industry is worth US$1 trillion globally by 2015 and Bahrain is likely to see a large proportion of this business given it hosts the largest concentration of Islamic Financial Institutions in the world. Many conventional banks, recognising the growing importance of Islamic banking, have successfully integrated Islamic windows within their operations. Bahrain Islamic Banks are likely to go through a period of consolidation given their desire to create economies of scale and recent liquidity issues. Joint ventures with UK banks could be a possible option given Bahrain’s standing as a key regional player due to the combination of its proximity to Saudi Arabia (the main market), the Central Bank of Bahrain (CBB) and the presence of a number of self regulatory organisations such as the; Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), International Islamic Finance Market (IIFM) and the Islamic International Rating Agency (IIRA). Insurance/Reinsurance Bahrain is now a hub for the insurance industry across the Middle East and is home to more than 172 insurance companies, both conventional and Islamic institutions serving both onshore and offshore markets. Motor insurance is the leading segment with personal/family insurance the main growth market. There are plans to have compulsory medical insurance which will increase gross premiums to an estimated BD 190 million by 2015. The Islamic Insurance market (T’akaful and ReT’akaful) contributions as a percenatge of Total Premiums written is estimated to increase to 31.2% by 2015; the highest increase in the Gulf States (source; Swiss Re). Many conventional insurance companies have now added T’akaful arms (ie Allianz T’akaful Bahrain, Hannover Re T’akaful). Capital Markets The Bahrain Stock Exchange (BSE) established in 1989 is small in comparison with other GCC states. However the Bahrain Financial Exchange (BFX), located in the Bahrain Financial Harbour, launched its Islamic finance activities in February 2011. It is the first multi asset class exchange in the Middle East region and is internationally accessible to trade cash instruments, derivatives, structured products and Sharia-compliant financial instruments. Access through the electronic trading platform and the BFX plug and trade trading floor, located at the Exchange, will allow market participants to raise capital, manage risk and enable investment in a secure environment with central counterparty clearing, settlement and depository. The Exchange is also pioneering financial training at an international level to facilitate market understanding and development. Education and Training Increasingly we are seeing the introduction of apprentice schemes and on-the-job training as well as the more traditional avenues of EQT. The Bahrain Institute of Business and Finance (BIBF) is currently working on a number of initiatives with the UK to improve educational policy in a number of Financial Services roles. The Labour Fund (Tamkeen) are investing US$75m to provide over 11,000 Bahraini nationals with sector-specific skills training over the next four years. Bahrain’s Government has introduced Education reforms that will continue to improve the quality of education and skills in line with the requirements of the private sector, adopting best practice from some of the world’s most successful educational models and creating a regional centre of learning. Legal, & Professional Services As the Middle East’s most liberal and open business environment there are increasing opportunities for Financial Services support industries. This is especially true in relation to the number of firms who have set up in Bahrain to benefit from cross-border work with Saudi Arabia, especially in the lucrative Eastern Province which is closer to Bahrain than Riyadh. As such the “Big four” professional services firms dominate the advisory services space in Bahrain. Also the Bahrain Centre for Dispute Resolution (BCDR) provides large opportunities for law firms being the first provider of alternative dispute resolutions in the MENA region. Infrastructure With the USD10 billion ‘Marshal Aid’ from other GCC states to Bahrain, the government will allocate most of this to developing infrastructure, particularly social housing. Latest export opportunities in the Financial and Professional Services sector Latest export opportunities in Bahrain Getting into the market Bahrain’s tax-free climate makes Bahrain an attractive place for foreign businesses to enter the market with 100% foreign ownership allowed. It is an open and liberal economy well-regarded for ease of doing business. Information about doing business in Bahrain including its economy, business culture, potential opportunities and an introduction to other relevant issues can be found in our doing business guide Contacts Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS). To commission research or for general advice about the market, get in touch with our specialists in country - or contact your local international trade team. ξ Imane Alalaiwat British Embassy Bahrain. Tel: +973 574129 or email: ξ Debbie Dixon British Embassy Bahrain. Tel: +973 17574117 or email: Contact your local international trade team Major Events 19th Annual World Islamic Banking Conference Date: 9 - 11 December 2012 UKTI Events UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows. Latest events in Financial and Professional Services sector Useful links More about OMIS and other UKTI services for exporters
Posted: 02 December 2012

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