Rasheed Mohammed Al Maraj: The role of the financial services industry
in Bahrain
Keynote speech by His Excellency Rasheed Mohammed Al Maraj, Governor of the Central
Bank of Bahrain, at the Bahrain British Business Forum, Manama, 21 November 2010.
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Distinguished Guests, Ladies and Gentlemen:
I would like to begin by thanking Mr. Al-Zayani for his kind invitation to address you this
evening. I would also like to extend an especially warm welcome to those of you who may be
visiting Bahrain for the first time. To those of you who are making a return visit, it is a great
pleasure to have you with us again.
As I am sure you are aware, the ties that bind Bahrain and Britain together are deep and
long-lasting. It should not be a surprise to learn that these bonds extend deep into the
financial services industry.
The predecessor to the Central Bank of Bahrain, the Bahrain Monetary Agency, was
established with technical assistance from the Bank of England. We have frequently looked
to the UK for our regulatory models, although we also have needed to adapt our policies and
practices to our specific circumstances.
Our aim is to adopt a regulatory approach that is open, transparent, and that involves close
consultation with the industry. We take the view that anything is permitted unless it is
explicitly prohibited. As a public institution, the CBB is also proud of the fact that we are
bound by the rule of law and we ensure that there is a clear legal basis for all of our
decisions and directives. The hallmarks of our regulatory approach are consistency,
predictability and equal treatment for both foreign and domestic firms.
These policies have served Bahrain well and have been a major contribution to the growth of
our financial sector. Since the 1970s, financial services have been one of the great success
stories of our economy, along with tourism and manufacturing that have also made strong
contributions to economic growth. Bahrain's economy has become the most diversified of
any in the GCC, with the financial sector accounting for over one quarter of our national
output, a larger share than oil production and processing.
At present, over 400 licensed financial institutions operate in Bahrain, including 133 banks
and 167 insurance companies. Many are branches or offices of major financial institutions.
Although our domestic market is small, many of the banks, insurers and asset management
firms located in Bahrain use their presence as a hub from which to tap into the enormous
opportunities that exist in both the GCC and the wider Middle East. As well as being attracted
to Bahrain by our comprehensive and transparent regulatory framework, these firms also tell
us that they are drawn here by the maturity and efficiency of our financial markets.
Bahrain has also become one of the world's primary locations for Islamic finance. We host
the largest concentration of Islamic banks in the world - currently they number 27 - as well
as many Islamic insurance and fund management businesses.
Important standard-setting bodies for Islamic finance, such as the "Accounting and Auditing
Organisation for Islamic Financial Institutions" and the "International Islamic Finance Market",
are located in Bahrain. The Bahrain Institute of Banking and Finance is one of the pioneers in
developing courses on Islamic finance to develop a pool of trained professionals with the
skills the industry requires.
The skills and dedication of Bahrain's population is reflected in employment in the industry.
Almost two thirds of people working in the financial sector are Bahraini nationals. This is
testament to the skills, training, and work ethic exhibited by our population.
Looking now to the future, the financial services industry will continue to play a very
prominent role in our economy. We realise that there are important lessons to be learned
from the global financial crisis and we will certainly take notice of them. Nonetheless, we
believe that Bahrain will continue to play a major role as the financial centre of choice for the
Middle East and North Africa region. We will continue to encourage a diversified financial
sector in which fund management and insurance will play an increasingly prominent role.
In recent years we have already seen very strong growth in the insurance segment of our
financial industry. Premium income has grown at an average rate of 18 percent over the past
five years, and the growth of Takaful - Sharia-compliant insurance - has been particularly
notable. There is enormous potential throughout the region for Sharia-compliant asset
management and insurance businesses.
Encouraging the growth and diversification of the financial sector is a major plank in the
Kingdom's 2030 Vision. This is a strategy which sets out our ambitions for a well-diversified
domestic economy for the post-oil era. It provides the unifying vision for a series of reforms
that are already underway or which we plan to make in the near future. Our aim is to further
liberalize an economy that is already ranked the most free in the Arab world.
Our liberalization strategy involves major reforms to a whole series of government institutions
and key markets. For example, last year we became the first country in the Gulf to abolish
the sponsorship system, thus allowing expatriate workers the freedom to change their
employers for the first time. We are also embarking on a major reform of our educational
institutions, such as establishing the Bahrain Polytechnic, as we realise that there is still
much work to be done to provide our young people with the types of vocational skills that
they need to flourish in the modern world.
Underpinning all of these initiatives is our continuing commitment to political reform. As you
will have seen in the news, in late October we held elections for the lower House of
Parliament, and these passed off peacefully and with a 67% turnout of the electorate.
Outside the Kingdom, some commentators had questioned our commitment to maintaining a
system of constitutional government. However, their skepticism was unfounded, and our
commitment to political reform remains strong.
Let me conclude by thanking you for coming to Bahrain and for attending the dinner this
evening. It is testament to the continuing strong ties between Britain and Bahrain, a relationship
that we have always valued in the past and will continue to value in the future.
Thank you for your attention.