Financial and Banking Sector in Bahrain
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, making it the leading financial center in the Gulf region.
The financial sector is the largest single employer in Bahrain, with Bahrainis representing over 65% of the work-force. Overall, the sector contributes 17.2% of Bahrain’s Gross Domestic Product (GDP), making it one of the key drivers of growth in the country.
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. The CBB’s regulatory requirements are contained in the CBB Rulebook, divided into six Volumes, each covering a different segment of the 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.
The banking sector has played a pivotal role in the emergence of Bahrain as a leading financial center in the region. As at December 2016, banking sector assets stood at over US$192 billion, more than twelve times annual Gross Domestic Product.
Industry growth has been supported by an open market economy; stable and prudent macro-economic and fiscal policies; a credible regulatory framework in line with international standards; and a notably strong and well qualified local workforce. All these factors have combined to cement Bahrain’s position as a regional banking hub, successfully attracting numerous foreign banking organizations to establish a physical presence in the country.
Recent growth in the sector has been backed by the good fortunes of the oil industry and the corresponding increases in liquidity. Banks are thus playing a central role in reinvesting surplus oil earnings as well as serving financing opportunities in other segments of the economy.
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 7 Islamic insurance companies (Takaful) and 2 Re-Takaful companies operating in the Kingdom. 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 Central Bank has played a leading role in the introduction of these innovative products.
The growth of Islamic banking in particular 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 a number of organizations central to the development of Islamic finance, including: i) the Accounting and Auditing Organization for Islamic Financial Institutions (‘AAOIFI’); ii) Liquidity Management Centre (‘LMC’); iii) the International Islamic Financial Market (‘IIFM’), iv) and the Islamic International Rating Agency (‘IIRA’) and v) 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.
Financial Sector’s Fact Sheet
Financial Sector Workforce:
Central Bank of Bahrain
403 (March 2017)
Bahrain nationals 9,049 (65%)
Foreign nationals 4,838 (35%)
Key Economic Indicators:
GDP (Current) US$31.1 billion (2015)
Growth – 6.8% (2015)
GDP (Constant) US$30.8 billion (2015)
Growth 2.9% (2015)
Financial Sector contribution to GDP 17.2%
BB- (S&P December 2016) with Stable Outlook
BB+ (Fitch June 2016) with Stable Outlook
Population 1,314,562 (2014)
Assets US$192.7 billion (September 2016)
No. of institutions 111 (March 2017)
Retail banks 29
Locally incorporated 14
Branches of foreign banks 15
Wholesale Banks 73
Representative Offices 8
Bank Society 1
Islamic Banks (included in above):
No. of banks 25 (March 2017)
Assets US$25.7 billion (September 2016)
Total No. of Insurance Companies & Organizations
Authorized in Bahrain 153 (March 2017)* excluding Appointed Representative
Gross premiums US$723,649 million (December 2015)
No. of Insurance Firms 36
Locally Incorporated Insurance Firms 25
Takaful & Retakaful Firms (included above) 7
Captives (locally incorporated, included above) 1
Overseas Insurance Firms 11
Insurance Brokers 31
Insurance Consultants 4
Insurance Managers 4
Representative Offices 4
Registered Loss Adjusters 13
Registered Actuaries 27
Insurance Ancillary Services 6
Insurance Pools & Syndicates 2
Insurance Society 1
Insurance Licensees Restricted: 25
Insurance Firms restricted: 19
Insurance Brokers restricted: 4
Insurance Consultants restricted: 2
Insurance Appointed Representative 24
Investment Business Firms:
Total no. of institutions 62 (March 2017)
No. of Investment Business firms 55 (March 2017)
Representative Offices 6
Bahrain Asset Manager Association 1
Total no. of institutions 54 (March 2017)
Money Changers 19
Fund Administrators License 3
Registered Administrators 1
Financing Companies 7
Microfinance Institution 2
Trust Service Providers 3
Ancillary Service Providers 18
Registered Professional Body 1
Market Capitalization US$ 17,449,985,291 (April 2016)
No. of firms 23 (March 2017)
Licensed Exchanges 2
Licensed Clearing, Settlement and Central Depository Systems 1
Licensed Securities Brokers 4
Licensed Securities Clearing Member 5
Licensed Securities Broker Dealers 11
Authorized Funds 2,610 (March 2017)
NAV US$7.548 billion (December 2016)
Local Funds (CIUs) 72
Locally Incorporated (PIUs) 9
Foreign Funds-Offshore 2,529 (March 2017)
NAV for Local Funds (CIUs and PIUs) US$3.255 billion (March 2017)
NAV for Offshore Funds US$4.069 billion (December 2016)
NAV for Islamic Funds (Local and Offshore) US$1.259 billion (December 2016)