Financial services in Bahrain are increasingly being measured not merely in terms of growth and numbers but also for quality by independent external assessment. The bare statistics point to a 26 percent share of GDP contributed by some 400 financial firms, including around 130 banks. The appraisals come from organizations such as the World Economic Forum (WEF), whose latest financial development report rates the Kingdom as having the most liberalized financial sector out of 57 leading global economies. Released on November 4, the report ranked Bahrain 23rd overall on the financial development index, up four places from 2009. Among the high points in the report was the country's sixth place for ease of companies seeking access to capital and third place for overall stability of the banking sector. According to Sheikh Mohammed bin Essa Al Khalifa, chief executive of the Economic Development Board (EDB), Bahrain's performance in the 2010 WEF rankings reflected improvements made to ensure sustainable growth of the financial system. “An increasing number of leading international companies looking to access the $1 trillion market of the Gulf are recognizing the business advantages of our tax structure, low operating costs and a transparent, stable banking system backed by tried and tested regulation,” he said after the report was issued. The findings of the WEF study were echoed days later by Global Investor magazine, which on November 10 named Bahrain the world's best financial centre. The publication said the award was made in recognition of the Kingdom's long-standing status as a centre of excellence for financial services. Central Bank of Bahrain (CBB) governor Rasheed Mohammed Al Maraj, said the prize also was an acknowledgement of the CBB's work as market regulator and the resilience of the sector. “The recognition of Bahrain's leadership in financial services is particularly timely as it comes during a time of continued weakness in the global economy following an unprecedented financial crisis,” he said. However, other business leaders say Bahrain needs to consider expansionary steps to keep its top position in a highly competitive market. Khalid Hamad, executive director for banking supervision at the CBB, recently told local media that domestic banks need to consider ways to strengthen and grow, such as boosting holdings, broadening their bases of operations or even merging with other lenders. The EDB's Sheikh Mohammed has also said that as local banks penetrate international markets, the need for consolidation is even more pressing. “I am one of these people who would favour consolidation. Let people grow and compete globally, absolutely,” he said. “Evolution in the industry is always good.” Local lender Elaf Bank is currently applying to financial regulatory authorities in Malaysia for a license to offer sharia-compliant banking services in that country. Elaf Bank's chief executive Jamil El Jaroudi sees the move as linking the long-established base of Islamic finance with a new force in the sector. “We have a strategic vision that we would like to bridge the two main Islamic hubs, Bahrain and Malaysia,” he said in late October. Elaf is not the only Bahrain-based bank expanding beyond its roots. The Arab Banking Corporation (ABC) announced on November 10 that it plans to open a representative office in Moscow, a step that will make it the first Arab bank in the Russian market. ABC's president and chief executive, Hassan Juma, said the time was right for the bank to have a presence in Russia, with the bank to open its office on November 25. “ABC believes that Russia offers considerable opportunities as a result of its dynamic economic development,” Juma said. Moves to consolidate and develop specialized core activities will also become more important in the future as competition for regional banking business heats up, and Bahrain's long-held dominance is likely to increasingly be challenged by its neighbours. However, while Bahrain will have to work to maintain its position, the Kingdom's environment and proven track-record will greatly help its cause.
