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. There is a total of 376 financial sector institutions in the country as of end of September 2020 including 31 retail banks, 62 wholesale banks, 17 branches of foreign banks and 8 representative offices of banks. These also include 34 insurance companies, 53 investment business firms and 86 specialized licensees.
The banking sector has played a pivotal role in the emergence of Bahrain as a leading financial center in the region. As of July 2020, banking sector assets stood at over US$212 billion, more than five times annual GDP of Bahrain.
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 well-qualified local and expat workforce. All these factors have combined to cement Bahrain’s position as a regional banking hub, successfully attracting numerous foreign banking organizations to establish their presence in the country.
Bahrain has long been recognized as a global leader in Islamic finance, playing host to the largest concentration of Islamic financial institutions in the Middle East and home to a number of pre-eminent global Islamic standard setting organizations. Islamic financial institutions offering a host of Shari’ah compliant products and services include 6 retail banks, 13 wholesale banks, 9 Islamic windows of conventional banks, 6 Takaful companies and 2 Re-Takaful companies. In addition, Bahrain is at the forefront for issuing Islamic securities (Sukuk), including short-term government Sukuk as well as long term instruments. The Central Bank has played a leading role in the introduction of these innovative products.
The growth of Islamic banking has been remarkable, with total assets increasing from US$1.9 billion in 2000 to US$32.7 billion as of July 2020, an increase of over 17 times. The market share of Islamic banks correspondingly increased from 1.8% of total banking assets in 2000 to 15.3% in July 2020. This growth was made possible by a variety of factors, most importantly the clear vision and approach of the Central Bank of Bahrain. The CBB introduced a separate regulatory framework along with a comprehensive prudential and reporting mechanism for the Islamic segment, tailor-made for the specific concepts and needs of Islamic banking and insurance. The rulebook for Islamic banks covers areas such as licensing requirements, capital adequacy, risk management, business conduct, financial crime and disclosure/reporting requirements. Similarly, the insurance rulebook addresses the specific features of Takaful and Re-Takaful firms. Both rulebooks were the first comprehensive regulatory frameworks that dealt with the Islamic finance industry in the region.
In order to develop the market for Islamic finance and invest in capacity building the CBB was instrumental in establishing the Waqf Fund in collaboration with the industry. Since 2006 the Waqf Fund has been offering programs in Islamic finance training, education and research to cater for the various industry needs. These include specialized programs targeting the Board of Director, senior management, Shari’ah resources and other staff of its member institutions.
Bahrain also plays host to a number of global organizations central to the development of the Islamic finance, including:
AAOIFI, established in 1991 and based in Bahrain, is the leading international not-for-profit organization primarily responsible for development and issuance of standards for the global Islamic finance industry. It has issued a total of 100 standards in the areas of Shari’ah, accounting, auditing, ethics and governance for international Islamic finance. It is supported by a number of institutional members, including central banks and regulatory authorities, financial institutions, accounting and auditing firms, and legal firms, from over 45 countries. Its standards are currently followed by all the leading Islamic financial institutions across the world and have introduced a progressive degree of harmonization of international Islamic finance practices.
Tel: +973 17244496
IIFM is a standard-setting body of the Islamic Financial Services Industry (IFSI) focusing on standardization of Islamic financial contracts and product templates relating to the capital and money market, corporate finance and trade finance segments of the IFSI.
TEL: +973 17500161
CIBAFI is an international organization established in 2001 and Headquartered in the Kingdom of Bahrain. CIBAFI is affiliated with the Organization of Islamic Cooperation (OIC). CIBAFI represents the Islamic financial services industry globally, defending and promoting its role, consolidating cooperation among its members, and with other institutions with similar interests and objectives. It has over 130 members from 34 jurisdictions, representing Islamic Banks, market players, international intergovernmental organizations and professional firms, and industry associations. In its mission to support Islamic financial services industry by being the leading industry voice advocating regulatory, financial and economic policies that are in the broad interest of our members and that foster the development of the Islamic financial services industry and sound industry practices, CIBAFI is guided by its Strategic Objectives, which are 1. Advocacy of Islamic finance Values and related Policies & Regulations , 2.Research and Innovation and 3.Training and Professional Empowerment.
Tel: +973 17357300
The Islamic International Rating Agency (IIRA) has been set up to provide independent assessments to issuers and issues that conform to principles of Islamic finance. IIRA’s special focus is on development of local capital markets, primarily in the region of the Organization of Islamic Countries (OIC) and to provide impetus through its ratings to ethical finance, across the globe.
Tel: +973 17211606
The BIBF is a semi-government training institute affiliated with the Central Bank of Bahrain, established in 1981. The Centre for Islamic Finance focuses on operations, products, services and professional qualifications. The Centre offers the oldest Islamic finance professional qualification in the world – the Advanced Diploma in Islamic Finance (ADIF), which also is the only such Islamic finance qualification with a progression route into a UK MBA. The Centre also provides advisory and technical services to clients wishing to structure Islamic products or gain access to the Middle East capital markets or who need governance and regulatory framework development assistance.
Tel: +973 17815555
The Waqf Fund
The Waqf Fund was established in November 2006 under the auspices of the Central Bank of Bahrain (CBB) in partnership with Islamic Financial Institutions (IFIs) in Bahrain. The member institutions made contributions to the Waqf Fund’s corpus which is invested in Islamic money market instruments and the return is used to finance the Fund’s initiatives. These initiatives are executed through partner organizations such as Bahrain Institute of Banking & Finance (BIBF). The Waqf Fund’s mandate is to serve its 22 member institutions through development initiatives and activities in Islamic finance training, education and research.
The Waqf Fund has a Board of Trustees comprising of 13 members. Mr. Khalid Hamad Al-Hamad, CBB’s Executive Director Banking Supervision, is the founding chairman of the Board. The Board includes representatives from member institutions and three independent members. The Board meets regularly to decide, based on industry experience and feedback, which initiatives to launch for the benefit of its member institutions.
|1. Advance Diploma in Islamic Finance:||Now in its 14th year, Advance Diploma in Islamic Finance (ADIF) program serves to provide young Bahraini graduates and junior staff of Waqf Fund member institutions with an orientation in Islamic finance. Islamic banks nominate their staff for the 9-month diploma program with BIBF. The Fund also financed the development of the ADIF curriculum by engaging a well-recognized consulting firm. The candidates study the following courses:
|2. Advance Diploma in Islamic Commercial Jurisprudence:||This program provides more depth in specific topics to the Internal Shari’ah Reviewers / Shari’ah Officers of Islamic Financial Institutions (IFIs). Spread over a one-year period and conducted in Arabic the Diploma consists of 8 modules:
The research component has been added for greater depth and quality and to ensure that the program’s learning outcomes are thoroughly achieved by all the participants.
|3. Advanced Shari’ah Reviewer Development Program:
|The Waqf Fund started out with a Shari’ah Reviewer Development Program (SRDP) aiming to provide basic orientation to Islamic and conventional finance/banking to Internal Shari’ah Reviewers / Shari’ah Officers of IFIs and plug any knowledge gaps. After successfully running the program for two years an advanced version was launched with added modules designed as short courses of 10-30 hour duration. The topics covered include:
|4. Roundtable Discussions||The Fund has held a series of Roundtable Discussions on developmental issues by bringing together leading figures in Islamic finance – including industry professionals, regulator and Shari’ah scholars – to focus on key issues and recommending a way forward. So far the Fund has held 12 such Roundtables. The recommendations from these Roundtables are compiled and forwarded to the Central Bank of Bahrain for its consideration and further action. Some of the industry developments were a direct result of these Roundtables while others are under consideration of the CBB. The topics discussed during these Roundtables are:
|5. Development of a course on Business Ethics for Islamic Bankers||The Fund sponsored the development of a general course through the BIBF on main Shari’ah principles on ethics for junior bankers. The course materials were developed and the course is now being offered by BIBF as a mandatory course as required by the Central Bank of Bahrain. The course aims to provide a basic understanding of Shari’ah-based ethical guidelines for practitioners, improving their confidence and promoting good governance at Islamic banks. The objective is to ingrain in the sales people a Shari’ah compliant sales approach, other front office functions to deal with clients based on Shari’ah principles, the middle office staff to review transactions bearing in mind the relevant Shari’ah principles, and the back office people to record, settle and maintain documentation bearing and observing Shari’ah principles, thereby establishing a Shari’ah oriented culture in the IFI.|
|6. Upgrade of the Advance Diploma in Islamic Finance curriculum||The Fund financed the development of the Advance Diploma in Islamic Finance (ADIF) curriculum of BIBF. The Fund engaged a leading consulting firm to assist BIBF in developing reference manuals on six subject modules to be used in the diploma program.|
|7. Assisted and sponsored University of Bahrain in developing and launching a 4-year B.Sc. in Islamic Banking & Finance program||The Waqf Fund joined hands with the University of Bahrain to support its 4-year bachelor program in Islamic banking & finance. The Waqf Fund has provided financial assistance to the program as well as helped in curriculum development by providing the industry’s perspective. Launched in 2012, this is a unique fusion program between Shari’ah and business. The graduates of this bilingual program are well equipped to work for any IFI in Bahrain and globally. They possess a rare combination of Shari’ah, banking, accounting, economics and business knowledge. They are integrated with the industry through seminars and internships. The program has produced over 80 graduates so far and approx. 400 students are currently enrolled.|
|8. Shari’ah Scholar sessions:||In 2013 the Waqf Fund started a regular session with leading Shari’ah scholars in the Islamic finance industry whereby they address the Internal Shari’ah Reviewers of IFIs in Bahrain on specific topics, followed by an extensive Q&A session. The purpose of this program is to provide an opportunity to up and coming Shari’ah scholars to interact with and learn from leading scholars through dialogue and discussion. 16 sessions have so far been held with scholars of international standing including Shaikh Esam Ishaq, Shaikh Nizam Yaquby, Dr. Hussain Hamid Hassan, Dr. Akram Laldin, Dr. Ali Elgari, Dr. Osaid Kailani and others. The topics covered include:
|9. Corporate Governance workshops:||Given the increasing importance of corporate governance worldwide there is a pressing need to continuously improve the CG standards of IFIs. The Waqf Fund has been offering CG workshops regularly since 2011 to its member institutions who have been participating enthusiastically including Chairmen, Board members and CEOs. 12 workshops have been organized so far in which over 250 people participated. An international expert in corporate governance who is also a former professor at Harvard Business School is engaged to deliver the workshops. The use of case study method not only helps bring out key issues, it also makes the workshop highly interactive and interesting for the participants. Key takeaways from these workshops are available here.|
|10. Sponsored AAOIFI to revamp its CIPA qualification:||Based on the industry feedback the Waqf Fund engaged with AAOIFI to sponsor further development of its flagship global Islamic accounting qualification – Certified Islamic Professional Accountant (CIPA) – to enhance its quality on par with equivalent and similar global qualifications. The objective was to develop the right human resources who combine conventional as well as AAOIFI accounting knowledge, understanding of the underlying Shari’ah principles and standards and exposure of practical issues facing Islamic financial institutions. The Waqf Fund engaged a leading consulting firm to revamp and substantially upgrade the curriculum in line with industry requirements as well as change the conduct of examination. This is the first major revision of the CIPA curriculum since its launch in September 2006. The Waqf Fund was the sole financial and technical sponsor for this important project. AAOIFI launched the revamped CIPA qualification in April 2017 and conducted the first exam based on the new curriculum in the same year.|
|11. Sponsoring AAOIFI to revamp its CSAA qualification:||The Waqf Fund has extended its sponsorship to revamp the Certified Shari’ah Advisor & Auditor (CSAA) qualification of AAOIFI. Since the disciplines of Shari’ah advisory and Shari’ah audit are unique to Islamic banks there are no global qualifications available in these areas. The CSAA qualification is being broken up into two distinct qualifications – Certified Shari’ah Auditor (CSAU) and Certified Shari’ah Advisor (CSAD) – and separate curricula are being prepared for each. It is expected that the first exams based on the new curriculum will be held in 2023.|
|12. Research project initiative:||The Waqf Fund has launched a research initiative focusing primarily on Internal Shari’ah Reviewers / Shari’ah Officers whereby they are financially incentivized to undertake research on a specific topic of interest. Such research, once completed, is to be presented to the peer group (other Internal Shari’ah Reviewers / Officers) and a select group of Shari’ah scholars for comments, critique and feedback. This will promote a research culture among Internal Shari’ah Reviewers / Officers and enhance their analytical, writing and presentation skills. The research topics will be practical, rather than academic, in nature and focus on real issues facing IFIs.|
|13. Sponsorship to IIFM for preparation of market standards:||The Waqf Fund provided financial assistance to International Islamic Financial Market (IIFM) to help complete four new standards. These include Islamic cross currency swap, Islamic credit support agreement, risk participation agreement and Sukuk standardization. The grant was used primarily to pay for Shari’ah and legal consultation costs.|
|14. Sponsorship for Islamic finance training program for Bahraini judges:||The Waqf Fund sponsored a program organized by the Ministry of Justice, Islamic Affairs & Waqf and delivered by BIBF. The 19-day training program aimed at providing Bahraini judges training in financial matters including insurance, banking, Islamic banking, capital markets, leasing, etc. The successful completion of the training has led to a more extensive training program to be delivered by BIBF in 2022. A tripartite agreement was signed on 13th April 2022 by the Waqf Fund, BIBF and Ministry of Justice, Islamic Affairs & Endowment.|
|15. Sponsorship for Islamic finance training program for Bahraini lawyers, judges and prosecutors:||The Waqf Fund sponsored 30 Bahraini lawyers, judges and public prosecutors to enroll in a two-day Islamic finance training workshop organized by the Chartered Institute of Arbitrators (CIArb). The purpose of the program was to orientate Bahraini legal resources towards Islamic finance.|
|16. Sponsorship for Islamic economics textbook:||The Waqf Fund was the lead sponsor of a textbook project led by Islamic Shari’ah Research Academy (ISRA), Malaysia on Islamic economics. Published in end 2018, the comprehensive textbook is meant for universities around the world, addressing the needs of students studying economics from an Islamic perspective. ISRA has already published a textbook on Islamic financial system which is currently being taught at more than 70 universities.|
|17. Leadership Grooming Program:||The Waqf Fund engaged a leading university in North America to launch a custom-made leadership grooming program for the middle management of IFIs in 2015. The purpose of this program was to prepare the next generation of C-suite executives who can steer the Islamic finance industry in the right direction. This initiative sought to address a key demand of the industry that the number of competent and high integrity Bahraini nationals in positions of authority should increase in the Islamic financial sector. The program targeted Bahrainis in mid management aged up to 45 years at the time of nomination and having at least 10 years of professional experience. The program ran for 17 working days in Hong Kong and Toronto, Canada and was attended by 37 employees of Waqf Fund member institutions. Primarily using the case study method the participants were provided advanced learning in leadership skills, strategic thinking and ethics, while also exposing them to the Asian business model and the financial sector of Canada. A subsequent training program of one-week duration was offered in 2017 addressing the challenges of leadership in an environment of major disruptions.|
|18. Chief Financial Officer (CFO) Grooming Program:||After the successful completion of the Leadership Grooming Program the Waqf Fund launched a program targeting the mid to senior level managers in finance and financial control departments to groom them for the CFO position. The Program was divided into two main modules – strategy and technical. A leading university in North America delivered the strategy module in Toronto, Canada while a Big 4 firm was selected to deliver the technical module in Dubai, UAE. An optional third module was also offered subsequently, delivered in Hong Kong, which required application of the knowledge gained into real life projects. Approx. 20 employees from Waqf Fund member institutions attended the program.|
|19. Compliance Head Grooming Program:||The Waqf Fund has launched another program focused on grooming compliance officers of its member institutions. The program delivered leadership, strategy and technical compliance training to 15 compliance heads and senior compliance officers in Singapore and Bahrain. A leading university in North America delivered the leadership and strategy module in Singapore while a Big 4 firm delivered the technical compliance training module in Bahrain.|
|20. Chief Risk Officer (CRO) Grooming Program:||The Waqf Fund launched the CRO Grooming Program targeting the risk management professionals within its member institutions with the objective to groom them for a CRO role in the future. A leading university in North America delivered the leadership & strategy module in Nov. 2022 while a Big 4 firm will deliver the technical risk management training in May 2023.|
|21. Internal Shari’ah Auditor Grooming Program:||The Waqf Fund launched the Internal Shari’ah Auditor Grooming Program. This was to fulfill a market need of having qualified and experienced Shari’ah audit professionals. It has been necessitated by the CBB’s introduction of the Shari’ah Governance module in 2017 which mandated a separate Internal Shari’ah Audit function. The participants went through an intensive two-week technical Shari’ah audit training. A leading Shari’ah audit and advisory firm conducted the training in Bahrain.|
22. Distinguished Leader series:
|The Waqf Fund occasionally hosts a Distinguished Leader to address the participants of the Waqf Fund’s various grooming programs. In this series accomplished individuals from the financial sector are invited to share their professional and personal journey so that young bankers can learn from these role models. So far three such sessions have been organized with the following leaders:
|23. Sponsorship of masters in Islamic Finance / Fintech-related program:||In 2020 the Waqf Fund started a sponsorship program for Masters in Islamic Finance / Fintech for the employees of Waqf Fund member institutions. Over the years the Waqf Fund’s policy has been focused more on sponsoring professional qualifications rather than academic degrees. However, there was significant demand from the industry to sponsor higher education which would benefit their employees directly in their jobs and also enhance their long-term career prospects. The Waqf Fund reimburses 75% of the total tuition fee up to BD 10,000 and the remaining 25% is paid by the employers. The candidates have to choose a top 1,000 globally ranked university. The program has attracted significant interest and 67 people have registered in three years.|
|24. Sponsorship of AAOIFI taxonomy project:||The Waqf Fund is sponsoring a major project of AAOIFI called the taxonomy project. The objective of the project is to organize, categorize and classify all the standards of AAOIFI in a logical sequence and to digitalize them in order to enable advanced searchability. All the Shari’ah, Accounting and Governance standards will be covered. At the completion of the project it will be possible for a user to enter a word and the system will produce all the clauses in various standards where this word has been used.|
|25. Sponsorship of alternative benchmark research project by IIFM and AAOIFI:||The Waqf Fund is sponsoring two leading Islamic standard setting bodies IIFM and AAOIFI in their search for an Islamic Interbank alternative benchmark as the conventional LIBOR is replaced. IIFM received Waqf Fund grant for the transition including risk free rates implementation solutions for financing transactions and fallback documentation for hedging segment. AAOIFI is leading the broader search for a series of appropriate alternatives. For this purpose it intends to host roundtables and initiate a technical research study to be sponsored by the Waqf Fund.|
26. Sponsorship of computer lab at the University of Bahrain:
|The Waqf Fund sponsored the computer lab at UOB’s College of Business Administration to support their research effort. The Waqf Fund Board also encouraged its member institutions to fund specific sub-projects for the benefit of the University.|
|27. Islamic banking preferences survey:||The Waqf Fund signed up with the University of Bahrain to conduct a market research survey of the Bahraini market to find out the banking preferences of the residents of Bahrain. The objective was to determine the key factors behind a person’s decision to opt for an Islamic bank or a conventional bank. The survey was completed and the report provides useful insights to enable Islamic banks to attract Muslim and non-Muslim customers alike towards their offerings.|
28. Sponsorship for BIBF initiatives – CFA program, FAP III and Sustainable Development Academy:
|The Waqf Fund is sponsoring the development of key programs by BIBF. These include the development of an Islamic finance qualification in partnership with the CFA Society Bahrain, to be launched initially in Bahrain but eventually to be championed as a global qualification recognized by the CFA Institute. Financial Advice Program (FAP) III, being developed with the help of the London Institute of Banking & Finance, is also being sponsored by the Waqf Fund. A third initiative of BIBF is the establishment of Sustainable Development Academy to offer different modules on Environmental, Social, Governance (ESG) and sustainability issues.|
29. Credit Officer Training Program:
|The Waqf Fund has signed up with an international trainer in forensic accounting to deliver a three-day training to credit officers of its member institutions. The objective is to enable the credit officers to detect red flags in credit applications and improve the quality of their due diligence. Over 40 participants are expected to benefit from this program.|
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