Kingdom of BahrainKingdom of Bahrain

Recent Development Recent Development

in Islamic Financein Islamic Finance

Presented by: Iqbal Jusoh CIFP Bright Scholar Student, INCEIF

Presentation OutlinesPresentation Outlines Country BackgroundCountry Background Recent Regulatory FrameworkRecent Regulatory Framework Recent financial infrastructureRecent financial infrastructure Recent development in Islamic Recent development in Islamic

Banking and FinanceBanking and Finance Recent development in Islamic Recent development in Islamic

Capital MarketCapital Market Recent development in Takaful and Recent development in Takaful and

Re-TakafulRe-Takaful

The Country:The Country:Kingdom of BahrainKingdom of Bahrain

• an island nation located in the Persian Gulf

• one of the fastest growing economies in the Middle East

• a prominent banking hub and leading centre for Islamic finance in the Middle East region

• hosts a number of international Islamic finance support institutions such as AAOIFI, GCIBFI, IIFM and IIRA

• Bahrain’s banking system is ranked on par with developed countries by FitchRatings

Recent Regulatory Framework :Recent Regulatory Framework :Establishment of CBB Establishment of CBB

Prior to 7 September 2006, all financial activities in Bahrain Prior to 7 September 2006, all financial activities in Bahrain are licensed and monitored by Bahrain Monetary Agency are licensed and monitored by Bahrain Monetary Agency (BMA)(BMA)

After 7 September 2006, Central Bank of Bahrain (CBB) After 7 September 2006, Central Bank of Bahrain (CBB) succeeded the role of BMAsucceeded the role of BMA

CBB is governed by the Central Bank of Bahrain and CBB is governed by the Central Bank of Bahrain and Financial Institutions Law (Legislative Decree No. 64 of Financial Institutions Law (Legislative Decree No. 64 of 2006) (“CBB Law”)2006) (“CBB Law”)

CBB Law is supplemented by CBB Rulebooks CBB Law is supplemented by CBB Rulebooks

Recent Regulatory Framework :Recent Regulatory Framework :Establishment of CBB Establishment of CBB

CBB is responsible for maintaining monetary and financial CBB is responsible for maintaining monetary and financial stability in the Kingdom of Bahrainstability in the Kingdom of Bahrain

It implements the Kingdom's monetary and foreign It implements the Kingdom's monetary and foreign exchange rate policies, manages the government's exchange rate policies, manages the government's reserves and debt issuance, issues the national currency reserves and debt issuance, issues the national currency and oversees the country's payments and settlement and oversees the country's payments and settlement systemssystems

also the sole regulator of Bahrain's financial sector, also the sole regulator of Bahrain's financial sector, covering the full range of banking, insurance, investment covering the full range of banking, insurance, investment business and capital markets activitiesbusiness and capital markets activities

Recent Regulatory Framework : Recent Regulatory Framework : Introduction of Trust LawIntroduction of Trust Law

Shortly prior to the establishment of CBB, BMA has Shortly prior to the establishment of CBB, BMA has introduced Trust Law in August 2006 which provides introduced Trust Law in August 2006 which provides comprehensive guidance and lays down rules related to the comprehensive guidance and lays down rules related to the creation and administration of financial trustscreation and administration of financial trusts

The law is aimed at providing a firm legal foundation for The law is aimed at providing a firm legal foundation for trust businesstrust business

It will also enable the Bahrain-based wealth management It will also enable the Bahrain-based wealth management industry to develop and extend more innovative products industry to develop and extend more innovative products and solutionsand solutions

It will also enhance the development of investment It will also enhance the development of investment products, both conventional and Islamic, that could be products, both conventional and Islamic, that could be offered using the trust mechanism, such as real estate offered using the trust mechanism, such as real estate investment trusts and private pension schemesinvestment trusts and private pension schemes

Recent Development in Islamic Recent Development in Islamic Banking and FinanceBanking and Finance

Centre for Islamic Finance Studies - a world class learning Centre for Islamic Finance Studies - a world class learning centre under Bahrain Institute of Banking and Finance centre under Bahrain Institute of Banking and Finance (BIBF)(BIBF)

Waqf Fund - initial principal of USD$4.6 mil raised by CBB Waqf Fund - initial principal of USD$4.6 mil raised by CBB with 8 leading Islamic banks aiming at financing and with 8 leading Islamic banks aiming at financing and publishing research in Islamic finance and Shariah issuespublishing research in Islamic finance and Shariah issues

Royal Bank of ScotlandRoyal Bank of Scotland – – established representative office in Bahrain with RBS established representative office in Bahrain with RBS

focusing in wholesale banking and its investment arm, focusing in wholesale banking and its investment arm, Coutts & Co. focusing in private bankingCoutts & Co. focusing in private banking

- RBS group’s first on ground representation in MINA region- RBS group’s first on ground representation in MINA region - RBS intends to explore opportunities in project finance - RBS intends to explore opportunities in project finance

and Islamic bankingand Islamic banking

Bahrain Financial HarbourBahrain Financial Harbour

Recent financial infrastructure

Bahrain Financial HarbourBahrain Financial Harbour USD$1.3 billion master USD$1.3 billion master

planned development on planned development on prime seafront property in prime seafront property in ManamaManama

aimed to be a complete aimed to be a complete financial cityfinancial city

it places the Financial Centre it places the Financial Centre at the heart of the harbourat the heart of the harbour

The Financial Centre, formally The Financial Centre, formally opened on 2 May 2007, opened on 2 May 2007, consists of Financial Mall, consists of Financial Mall, Dual Tower and Harbour Dual Tower and Harbour House House

Alongside the Financial Alongside the Financial Centre, Bahrain International Centre, Bahrain International Insurance Centre (BIIC) will be Insurance Centre (BIIC) will be constructedconstructed

Recent Development in Recent Development in Islamic Capital MarketIslamic Capital Market

Dow Jones Citigroup Sukuk Index - in April 2006, Bahrain-based Dow Jones Citigroup Sukuk Index - in April 2006, Bahrain-based Citigroup developed with Dow Jones Indexes a benchmark for investors Citigroup developed with Dow Jones Indexes a benchmark for investors seeking exposure to Shariah compliant fixed-income investmentsseeking exposure to Shariah compliant fixed-income investments

The index will track the performance of 7 Sukuk issuances namely IDB The index will track the performance of 7 Sukuk issuances namely IDB Sukuk, Solidarity Trust Sukuk, BMA International Sukuk, Qatar Global Sukuk, Solidarity Trust Sukuk, BMA International Sukuk, Qatar Global Sukuk, Malaysia Global Sukuk, Sarawak Sukuk and Dubai Global SukukSukuk, Malaysia Global Sukuk, Sarawak Sukuk and Dubai Global Sukuk

The Sukuk featured must comply with Shariah and AAOFI Standard for The Sukuk featured must comply with Shariah and AAOFI Standard for tradable Islamic Bondstradable Islamic Bonds

Recent Development in Recent Development in Takaful and Re TakafulTakaful and Re Takaful

Allianz Takaful - a new Bahrain-based takaful company set up by Allianz Group Allianz Takaful - a new Bahrain-based takaful company set up by Allianz Group and will serve as the group’s global hub for Islamic insuranceand will serve as the group’s global hub for Islamic insurance

AIG Takaful – a new regional headquarters for AIG Group for takaful industryAIG Takaful – a new regional headquarters for AIG Group for takaful industry Hannover Re Takaful Hannover Re Takaful – – a German’s company with paid up capital of USD$53 Mil a German’s company with paid up capital of USD$53 Mil - Hannover Re’s 1- Hannover Re’s 1stst venture in Middle East region venture in Middle East region

Solidarity Insurance – Bahrain-based biggest Islamic insurer in the world, Solidarity Insurance – Bahrain-based biggest Islamic insurer in the world, increased paid up capital from USD$100 Mil to USD$275 mil, for operation increased paid up capital from USD$100 Mil to USD$275 mil, for operation enhancement and international expansion strategyenhancement and international expansion strategy

ConclusionConclusion

Despite the small size of the Despite the small size of the Kingdom, Bahrain emerged as Kingdom, Bahrain emerged as a premier international a premier international financial centre in the Middle financial centre in the Middle East region due to various East region due to various major initiatives taken by the major initiatives taken by the Kingdom’s CBB (especially its Kingdom’s CBB (especially its

predecessor BMA)predecessor BMA)