Despite being synonymous with financial expertise for more than 40 years, Bahrain is not resting on its laurels, and it faces stiff competition from growing regional centres like Abu Dhabi, Dubai, Doha and Riyadh. Bahrain climbed 12 places in the 15th Global Financial Centres Index (GFCI) published by Z/Yen Group in March 2014. But its recent ascent, based on a six-month period, only earned Bahrain 40th place in a ranking of 83 financial centres around the world. Ahead are Qatar at 26th, Dubai (29th), Riyadh (31st) and Abu Dhabi (32nd).

Researchers measured each centre by comparing 103 “instrumental factors” noted in international reports. Many of these factors would appear to cover strengths in Bahrain’s value proposition. The business environment factor covered corruption, transparency, the rule of law and the efficacy of the financial regulator; taxation measures rewarded clarity, transparency and simplicity; human capital factors included immigration rigidity, investment in employees’ skills and the availability of a skilled workforce; infrastructure covered ICT speed and security; market access assessed the physical proximity to clients and suppliers; and reputation considered past performance, but also perceptions of risk. It was in the latter category that Bahrain scored poorly, with a higher level of “unpredictability” than any centre except for Busan in South Korea, a new entrant to the index. These measurements were then further qualified by using an online survey of 3246 financial services professionals. Of 1932 respondents, just 123 came from the Middle East and Africa. To gain a clearer insight into Bahrain’s role and potential role as a financial centre, OBG spoke to seven leading players in the financial sector to assess their views on its current strengths and opportunities for the future.

The Regulator

The Central Bank of Bahrain (CBB) has been overseeing the kingdom’s financial institutions since 2006. Mohammed Ayman Al Tajer, director of the CBB’s financial institutions supervision directorate, outlined Bahrain’s strengths to OBG: “Those who come here to do business find it extremely attractive in terms of proximity to neighbouring GCC states and the MENA region on the whole. In particular, Bahrain’s proximity to Saudi Arabia facilitates dealing with the region’s biggest economy efficiently. The country also has strong ties to Kuwait, and Kuwaiti firms have established a good track record with the Bahraini financial sector.” “Additionally, there is a trained and qualified local workforce,” he continued. “Cost is also a positive factor when you compare office rents and general expenses in Bahrain to other financial centres. Our private education system, which boasts very strong US and UK curricula, is particularly important, as expats moving here value a good education system.”

“Since 2008 the economy and investment climate has been difficult, but during the last few years we have seen a number of new set-ups making themselves ready to ride the next wave” Al Tajer said. “The morale is moving towards the positive after previous years. In 2010, if you asked if it was going to be a good year, the sentiment would have been far less optimistic than now. Now there is a sense of optimism and confidence.”

The Economist

Bahrain’s Economic Development Board (EDB) is keen to leverage the country’s advantages and to attract more foreign investment. The chief economist of economic planning and development at the EDB, Jarmo Kotilaine, believes its advantages are manifest. “This country remains a place with a very attractive value proposition,” Kotilaine told OBG. “You have a combination of human capital, tried and trusted nationwide regulation, and regional connectivity. If you want a good place to do business, then this is definitely one of those places. The economic cycle has been changing, but what you have here is a very long-term story and that is what being a centre for business has to be about.” Kotilaine believes the growth of other financial centres in the Gulf does not necessarily represent a threat. “Europe now has more financial centres than at any time in its history and I do not think they are centres that have been formed at the expense of others,” Kotilaine said. “Bahrain will continue to have a very important role to play as a financial centre.”

The Academic

However, for Subhadra Ganguli, head of banking at the Bahrain Institute of Banking and Finance (BIBF), a more collegiate approach among the GCC’s members might have enabled the region to punch above its weight. “Today Dubai wants to be the centre of Islamic finance and Qatar wants to do the same,” Ganguli told OBG. “Country-specific specialisations would have been a much more sensible approach for the GCC as a whole.” BIBF was set up in 1981 to provide professional training to people working and aspiring to work in finance, banking and insurance. In 2011 alone 18,000 students from 18 countries studied on one of its 300 programmes. Ganguli believes Bahrain’s tradition of investment in human capital is key to enhancing its future prospects. “The thing about Bahrain is that it can do more, because its financial workforce is skilled and qualified and I think we could leverage on that for other sectors of the economy too,” she said.

The Financial Analyst

One of the hallmarks of Bahrain’s financial sector has been its role as a trailblazer and innovator. It was the region’s first financial centre, it has been a leading light in the education of financial services staff, and it has been a pioneer for Islamic financial services. This is reflected in its banking and insurance sectors, in the specialist services provided by the CBB and by the fact that key international Islamic finance institutions have chosen Bahrain as their global headquarters. The International Islamic Financial Market is based in Bahrain, as is the International Islamic Ratings Agency (IIRA). For Mohammad Raza Lakhani, a financial analyst with the IIRA, Bahrain was a natural choice. “The number of financial institutions in Bahrain is much higher, and they went into it in the 1970s and developed much better infrastructure than in Dubai,” Lakhani told OBG. “The CBB is a much better regulator than in any competitor jurisdiction and everything is in place. There is a code of corporate governance here. The UAE is coming back but Bahrain has a perception issue. The GCC is recovering and Bahrain is also going to see some fruits. Bahrain allows 100% foreign ownership. Dubai does not. Bahrain has the most liberal laws. It also has the best GCC workforce. We have chosen Bahrain to establish IIRA, and the CBB has been pushing IIRA’s services and the importance of rating to financial institutions here.”

The Investment Banker

Abdulla Bukhowa, head of global markets for Bahrain at Standard Chartered, believes his country needs to reassert itself. “I still think we are one of the top two or three places, but we are facing competition and we have to use every advantage. It’s not enough to be as good as your competition,” Bukhowa told OBG. “We have a big economy next door and we enjoy healthy relations with that economy. It is a natural extension for investors from Saudi and it is easy, and neither Dubai nor Qatar can say that.”


Although the total value of assets held by the financial sector in Bahrain has fallen from a peak in 2008 as wholesale banks have deleveraged to boost stability, the consensus among those working in the Bahrain’s financial sector is that its fundamental value proposition as a banking centre remains robust.