The Banking Sector in Bahrain: A Hub for Growth and Diversification

The banking sector in Bahrain has undergone significant transformations in recent years, driven by the Central Bank of Bahrain’s (CBB) efforts to promote financial inclusion, reduce operating expenses, boost efficiency, and attract foreign investment. As a result, the sector is poised to continue leading non-oil growth and diversification in the kingdom.

Key Highlights from the Banking Sector in Bahrain

• Infrastructure Development: The CBB has established a structured finance desk for big-ticket infrastructure projects and finance agreements, with assets valued at approximately $1 billion as of mid-2019.
• Fintech Growth: The CBB is working to transform the sector into a leader in fintech by proactively adopting and reforming regulations for emerging segments, including open banking, cryptocurrency, and crowdfunding.
• Open Banking: Bahrain has become one of the first countries in the Middle East to mandate adoption of an open banking system, with different banks’ online banking and mobile apps made interoperable via a third-party platform.
• Credit Access: The CBB issued regulations for equity and crowdfunding activities, enabling SMEs to raise money using licensed platforms, under which companies must be CBB-licensed and have mandatory minimum capital of BD50,000 ($133,000).
• Non-traditional Lenders: Growth among non-traditional lenders could help reduce difficulties in accessing credit, with Bahrain ranking sixth in the MENA region for getting access to credit according to the World Bank’s “Doing Business 2020” report.

Outlook and Challenges

The banking sector in Bahrain is well-positioned to continue leading growth and diversification in the kingdom, driven by ongoing fintech development, profits, soundness indicators, and asset growth. However, external and domestic headwinds may present hurdles to expansion, particularly for access to credit.