Riyadh, Asharq Al-Awsat-The Kingdom of Bahrain is an archipelago of around 33 islands, the largest of which is the island of Bahrain which is approximately 591 kilometers squared and which accounts for around 83 percent of the total area of the Bahrain archipelago. The country is named after its largest island, whose capital, Manama, is located in the north eastern part of this island. Bahrain has a total population of around 738,000; 82 percent of which are Muslims, 9 percent Christians, and the remaining 9 percent following various other faiths. Bahrain also has a literacy rate of 89 percent, and is among the fastest developing and most economically open MENA [Middle East and North Africa] countries. Although it is classified as an oil-producing country – with oil production making up approximately 40 percent of the country’s GDP – Bahrain’s oil resources are limited and on the verge of running out. Bahrain’s political leadership are aware of this, and have attempted to diversity the country’s sources of income by promoting different economic activity, focusing upon two important sectors; tourism and finance.
What concerns us here is the financial sector, for from an early stage Bahrain sought to be an important financial center for the region, taking advantage of its presence within this economic environment that was closed [to Islamic finance] until recently. Thanks to this initiative Bahrain became a top destination for international financial corporation, second only Switzerland in terms of the number of licensed banks and financial institutions. There are around 400 banks, investment companies, and insurance companies that are licensed in Bahrain today, and they contribute to around 27 percent of the country’s GDP. The financial sector also represents the backbone of employment in Bahrain, as around 14,000 qualified cadres work in this industry, 67 percent of whom are Bahraini nationals.
However Bahrain was not content with merely being a conventional financial center, and instead sought to become a creative financial center, adopting the Islamic banking industry at a time that this industry had yet to draw international attention. However Bahrain viewed Islamic banking as being the future of the financial industry in the region, which is a vision that time has shown to be particularly shrewd as international financial centers today are competing to attract Islamic financial institutes and corporations. Bahrain today is one of the largest Islamic financial centers in the world, with 45 Islamic financial corporations operating in the country; 26 of which are Islamic banks, with the remaining 18 being Takaful [Islamic] insurance companies. Bahrain’s Islamic financial assets have multiplied more than 12 times since 2000 from being worth just 1.9 billion dollars, to being worth 26.3 billion dollars in 2009. In 2000, Islamic banking made up just 1.11 percent of the total assets of the Bahrain financial industry, whereas in 2009 this figure stood at 11.1 percent. Bahrain’s Islamic financial industry has witnessed annual growth of between 15 and 20 percent over the past five years.
These striking figures tell the story of Bahrain’s success in the field of Islamic banking, which is something that did not happen spontaneously, but as a result of hard-work and long-term strategic planning. Bahrain was working to activate, strengthen, and develop this industry at a time when others were either opposing it, or at best, ignoring it. Today you can hardly find an Islamic financial institute that is not connected in some way to Bahrain, either with Bahrain providing this institute with financial support, legal cover, or hosting its headquarters, or all three. In addition to developing infrastructure for the Islamic financial industry, Bahrain is also a member of the Islamic Financial Services Board [IFSB] which is located in Malaysia, as well as a founding member and headquarters to a number of Islamic financial service and regulatory bodies. These include the Accounting and Auditing Organization for Islamic Financial Institutions [AAOFI], the Liquidity Management Center [LCM], the International Islamic Financial Market [IIFM], the Islamic International Ratings Agency [IIRA], and the General Council for Islamic Banks and Financial Institutions [CIBAFI].
As for legislation, laws, and supervision, Bahrain is one of the few countries where there is specific Islamic financial legislation, and a supreme Shariaa body linked to the Central Bank. Bahrain was also one of the first countries to issue sovereign sukuk bonds, and it continues to do so despite the global financial crisis, relying upon the county’s excellent credit rating in order to support this Islamic financial tool. Bahrain has also relentlessly worked to promote the Islamic financial industry, upgrade its staff, and open up its markets, via conferences, seminars, and workshops to the point that these conferences have become annual events that everybody early looks forward to, like the World Islamic Banking Conference, which recently held its 16th meeting. These conferences, workshops, and seminars are often held under the direct supervision of Bahrain Central Bank governor Mr. Rasheed al-Maraj, This reflects the infinite support given to the Islamic financial industry in Bahrain, which makes Bahrain nothing less than the “pearl of Islamic Banking.”