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Friday, October 05, 2007

Bahrain is an Islamic Bank Boomtown

Bahrain and Malaysia are fast becoming the Twin Islamic Finance Centers of the World. They have seen enormous growth in the last 30 years. Though Some Islamic Banks have been significant players in financing pre and post 9-11 activities, Islamic Banking and other Islamic Finance systems are not Terrorist Activities.

However, terrorists are using Islamic Financial systems to fund their operations. Therefore, we need to understand how the systems operate, and where the centers of operation are.

Note that some institutions listed in the article that follows have been named in terrorist watch agency lists,( see the right margin for their many links)

-Shimron


Note
During the last 30 years Islamic banking and finance has developed, evolved and thrived across the world to become a major global industry.

Bahrain is recognised as having one of the pre-eminent financial services centres in the Middle East, across a range of asset classes such as:
  • private banking,
  • fund management
  • insurance and capital markets
  • and is noted as a pioneer in Islamic banking and finance.

Before Dubai became the darling of the Middle East the only place to do business in the Gulf was Bahrain.

The small island state remains home to numerous multinational firms with business in the Gulf.

  • Petroleum production and refining account for over 60 per cent of Bahrain's export receipts, over 70 per cent of government revenues, and 11 per cent of gross domestic product, underpinning Bahrain's strong economic growth in recent years.
  • There are currently 27 Islamic financial institutions, 24 Islamic banks and three banking related institutions operating in Bahrain, which is the largest concentration of Islamic financial institutions in the Middle East.

Many institutions have their Islamic banking business headquartered in Bahrain, including:

Bahrain is one of the world's most proactive and energetic centres for Sukuk issuance with a Sukuk being launched on an almost weekly basis.

The Bahraini government was the first country to issue sovereign Sukuk and one of its most popular issues is Ijarah Sukuk.

The popularity of Bahraini Ijarah has attracted international interest from conventional banks.

Success in developing Sukuk has led to other GCC countries looking to Bahrain to manage their Sukuk programmes.


The private sector has also enthusiastically entered the Sukuk game. One of the most notable recent issues was Gulf Finance HouseGulf Finance House's (GFHGFH) $1 billion Sukuk last month.

The Sukuk was issued, as Peter Panayiotou, deputy chief executive of GFHGFH
commented, "To finance the bank's strategic investment portfolio, comprising its 70 per cent state in Khaleeji Commercial BankKhaleeji Commercial Bank in Bahrain and its 15 per cent stake in QINVEST, Qatar's first Islamic investment bank."


Manama can also lay claim to being the capital of the world's Takaful industry. Although other centres around the world are trying to wrest control of this potentially massive business from Bahrain, it still retains a steely grip on the Takaful industry.

Bahrain's leading Takaful companies include

From an already strong foundation Takaful is growing into a major force in Bahrain, with its leading Takaful companies enjoying growth at more than double the level of conventional companies. Premiums for Takaful have been growing phenomenally, showing an increase of 174 per cent between 2004 and 2005, the last period for which full figures were available.

A case study that illustrates the growth of Takaful in Bahrain is Solidarity. Founded in 2004 it has grown to become one of the world's largest Takaful companies by assets. Solidarity has started to forage further afield opening operations in Qatar and Saudi Arabia and has applied for a licence to operate in Malaysia in 2006.

The government is planning to reinforce Bahrain's position as a hub for the Takaful market, to protect and develop this fledgling and potentially lucrative industry.

The Central Bank of Bahrain (CBB) has been working to establish an International Takaful Association in Bahrain and make it the headquarters of the industry.
This would seem a logical step for the industry as there are so many Islamic finance bodies already in Bahrain, such as the:

If Takaful is to grow to the predicted $14 billion by 2015, and the government secures Bahrain as a hub, this sector of the financial industry could be a massive income generator for the country.

Bahrain has an extensive heritage and a progressive approach to Islamic finance. Its evolution into an international centre for Islamic banking came, in part, from a recommendation made in 1978 at the Organisation of the Islamic Conference, an inter-governmental organisation of 56 states that collaborates to ensure progress and well-being for the global Muslim community.

There was discussion at the conference about the need for Muslims to have specific economic and financial products and services to adhere to their religious beliefs and principles. The Muslim community, both in the Middle East and worldwide needed financial products and services that mirrored their faith in a way that conventional banking could not.

Islamic banking was the solution to this requirement. Bahrain was already emerging as a prime location for financial services in the Gulf region and was identified as the natural location to develop Islamic banking and finance. The Bahrain Monetary Agency, which has now become the CBB played a fundamental role in the adoption of Islamic banking in Bahrain, establishing the necessary supervisory and regulatory framework to enable this sector to flourish.

There is much more @ Zawya


Article originally published by Banker Middle East 03-Aug-07

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