Bahrain has been ranked second globally and first in the MENA region in the fifth edition of the Islamic Finance Development Report and Indicator (IFDI) by Thomson Reuters and the Islamic Corporation for the Development of the Private Sector (ICD) – the private sector development arm of the Islamic Development Bank (IDB). This is the fifth consecutive year that Bahrain has retained its second place, following Malaysia in the first position.
“As our region undergoes a dramatic economic transformation, the GCC presents exciting opportunities for international investors. Islamic Finance is a core pillar of our region’s offering,” said Khalid Hamad, Executive Director of Banking Supervision at the Central Bank of Bahrain. “We also continue to see investments made in technology and these are making a tangible impact, unlocking innovation and entrepreneurship. We see huge potential in the connection between technology and Islamic finance; with technology being a disruptive force across so many industries, Bahrain is continually in a strong position to leverage the opportunities available.”
Islamic finance assets grew 7 percent globally to US$2.2 trillion in 2016 and are projected to reach US$3.8 trillion by 2022, showing great momentum in the sector. With 24 Islamic banks holding assets valued at over US$25.7 billion, the report also noted that Bahrain is making great strides through the promotion of Islamic finance education and literacy. Bahrain’s Islamic regulatory environment, where the Kingdom was placed first globally in overall regulations and in Shariah governance, was also praised. The Central Bank of Bahrain, recently, released a new Shari’ah Governance module which is significantly impacting the Shari’a compliance and governance standards among Islamic banks in Bahrain, in an effort to set clear benchmarks for the global Islamic banking market. The Shari’a Governance module sets higher standards of transparency, governance, and competence, clarifying the roles and responsibilities of the management and the Board of Directors towards Shari’a compliance.
Fundamental to the growth of all banks is the power of data. Supporting the development of its financial services industry, Bahrain has also just been announced as the regional leader in ICT Development for the fourth year running, enabling other sectors to take advantage of the state-of-the-art technology available in the Kingdom.
“With Bahrain’s very high level of internet usage, we are capitalizing on the development of the ICT sector,” said John Kilmartin, Executive Director of ICT at the Bahrain Economic Development Board (EDB). “Amazon Web Services (AWS) recently announced the launch of its first Region in the Middle East based in Bahrain. This is an indicator of the sentiment around investment in ICT here. We are in a unique position to foster the growth of disruptive technologies and promote innovation in traditional industries.”
The index measures ICT development based on skills, access, and usage, relying on quantitative data sources from UNESCO and ITU. Bahrain is leading the MENA region in the ICT Development Index, ranking 33 out of a total of 188 countries worldwide, and far ahead of the other players in the region. Furthermore, Bahrain’s key strengths rest on an extremely high level of internet penetration, with 98% of the population being active internet users; this compares to an average of only 77.6% in European countries. It has amongst the highest levels of smartphone ownership, supporting a significant level of social media and online banking usage.
The Kingdom is supporting the disruptive power of technology and the growth of new industries by continuing with a policy of regulatory reform. This year saw the establishment of a regulatory sandbox, the introduction of Shari’a-compliant and traditional crowdfunding regulations, and saw the launch of Bahrain Fintech Bay, the largest Fintech hub in the Middle East, creating the right framework for technology to disrupt traditional Islamic finance.
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