Interview: Ahmed Dayyat

In the face of growing regional banking competition, how should Bahrain’s sector develop strategies to maintain market share?

AHMED DAYYAT: Solid and proactive coordination is required between the Central Bank of Bahrain (CBB), the Bahrain Association of Banks (BAB), the Economic Development Board (EDB) and the Bahrain Institute of Banking and Finance (BIBF) to ensure the banking sector’s status as an anchor and major regional player is maintained. Bahrain’s competitive advantage can be enriched and further developed through continuous development of human capital, the existing sound regulations, and closer and more frequent coordination between the banks and the CBB, BAB, EDB and BIBF. These things combined will all help ensure that Bahrain’s banking system retains its competitive edge in the region, and remains robust and resilient moving forward.

How does Bahrain’s credit rating affect banks with a solely commercial client base in the country, and how are you responding to this?

DAYYAT: Business strategies for local commercial businesses in Bahrain are not dependent on external rating agencies. Undoubtedly, local commercial businesses will be impacted by weakening economic conditions and the rise of interest rates. Nevertheless, there will continue to be opportunities to maintain and grow such operations. The impact is expected to be significantly softened by the large investment in national infrastructure from the GCC development fund, and by regional opportunities for growth.

To what extent would integration of the GCC credit bureaus impact Bahrain?

DAYYAT: Strengthening the communication, collaboration and knowledge exchange between GCC countries will help support the regional credit reporting industry and, in turn, enhance the GCC economies and credit markets. Indeed, the establishment of the BENEFIT Company in Bahrain, in collaboration with the CBB, has already widened the availability of credit to smaller businesses, and has also helped to improve the credit quality of banks’ credit portfolios.

What effects will the US Federal Reserve rate hike have on enterprises based in Bahrain that are focused on exporting goods to the US?

DAYYAT: In this regard it is important to note that Bahrain was the first Gulf state to arrange a free trade agreement with the US. This has served to give Bahraini exports a competitive advantage over those from most other Middle Eastern countries. However, it is true that the rise in interest rates will have a direct impact on the financing costs of companies and will put pressure on profit margins. This is especially likely when one considers that the increase in US dollar interest rates has almost always been accompanied by an increase in the Bahraini dinar interest rates. We are confident, however, that the impact of the hike will not be significant at this stage.

Considering the easy accessibility to Saudi Arabia, what opportunities remain for banks to take advantage of the market?

DAYYAT: Saudi Arabia is the most important trade partner for Bahrain. It is true that an important part of business success in Bahrain relies on easy access to the Saudi Arabian market, but private businesses and the relevant official bodies are also enhancing their trade relationships with other countries in several different regions. The banking sector in Bahrain has benefited from the trade flow with Saudi Arabia, and there definitely continues to be significant opportunities available in this regard. Banks need to be innovative and offer a broad range of customised products and solutions that can help concerned businesses and assist them in achieving their goals.