Bouncebackability was a phrase coined by the aesthetically-challenged former soccer striker and manager Ian Dowie. It described the ability of Crystal Palace Football Club, a side Dowie managed between 2003 and 2006, to recover from going down a few goals early on in the game to gain a draw or win in the match. Dowie, affectionately known as Quasimodo, the fictional inhabitant of the Notre Dame Cathedral in Paris by opposing fans, was renowned for his ability to recover from a severe bashing as a manager or center forward and bravely stick his face back in the danger zone when duty called.
In a way Bouncebackability is a good analogy to describe Bahrain, the global ambassador for Islamic finance before the start of 2011. This year has been an annushorribilis for Bahrain, as after a bright and optimistic start, the country was paralyzed by popular political protests which kicked off on February 14 (incidentally the week that The Islamic Globe launched) and which are still ongoing, leaving the atmosphere on the streets ‘tense’. If political protests at home were not enough to contend with, Bahrain has been affected by external economic factors as the world’s markets suffered another coronary attack as Europe and North America tried and failed to deal with their sovereign debt crises. The collapse of the Eurozone and inability to find a political compromise to the economic tsunami that is consuming the US has frozen global credit markets and had a significant effect on the global Islamic banking sector.
With Islamic banking as one of Bahrain’s top exports, a lot of the wind behind the country’s economic growth was knocked out of its sails.
The ongoing unrest caused several of the international banks, always a fickle and capricious bunch, to downscale their operations in the country, to temporarily decamp to less volatile regional financial centers or leave the region entirely.
The net winners from Bahrain’s tribulations have been the Islamic finance nuclei of the country’s close neighbors, Dubai and Qatar, and the question on everyone’s lips was: ‘Is Bahrain finished as an Islamic finance hub?’
And this is where Bahrain has started to show its mettle. Walking around the Gulf Convention Center in Manama today and mingling with the 1,200 or so delegates from around the world at the latest edition of the annual global Islamic finance jamboree, the World Islamic Banking Conference, would tend to offer up the answer the although it’s not ‘Business as Usual’ the country is vigorously demonstrating that ‘Bahrain is open for business’.
Bahrain has started its rehabilitation process and, with a maturity not often seen in this region, has put its hand up and admitted it has a problem and on a social and political level made mistakes. Today we can judge how far this process has come as the Bahrain Independent Commission of Inquiry submits its report to King Hamed bin Isa al-Khalifa, the ruler of the country. It will take time for the Diwan to analyze Professor Mahmoud CherifBassiouni’s findings and recommendations and it remains to be seen what political, social and economic reforms will be made by the ruling elite. But despite the demands of the protestors and the polarisation of the policies of the government, the internal debate to salve Bahrain’s self-inflicted wounds has begun.
Spearheading the reform process is the Islamic banking sector, as many of the country ills can be addressed by a return to strong economic growth. The term paradigm shift is often overused, but in the case of Islamic banking it is a reality. New markets are emerging in Africa and Asia and opportunities in untapped markets like Europe and North America are appearing and the Islamic finance industry needs leadership.
In the local Islamic banking community positivity abounds. One CEO of an Islamic bank waxed lyrical to us about new opportunities for his bank in Africa, most notably Sudan. Another CEO told us that he was reorganizing his institution and creating a merchant banking model focused on regional opportunities and emerging markets like Turkey and away from the casino-style investment banking model.
Much of the drive is coming from the center. Khalid Hamad, executive director of banking supervision for the Central Bank of Bahrain told The Islamic Globe that the government had been encouraging a marriage between the smaller Islamic banking institutions in the kingdom, so that entities: “could build muscle, increase capitalization, take on larger ticket deals and export the Bahrain banking brand internationally.” He said that as well as the BisB/Salam Bank merger, three other Islamic investment banks were on the cusp of merger while two conventional retail banks and, separately, one conventional and one Islamic bank are slated to merge early in 2012. Hamad also said that the CBB is pushing greater professionalism in the Islamic banking sector by increasing training and education in the sector to create the next generation of local savvy Shari’ah scholars and Islamic banking professionals.
Bahrain needs Islamic finance to be a success and the recovery of the Islamic banking sector is of paramount importance to the government. Sheikh Mohammed bin Essa al-Khalifa, CEO of the Bahrain Economic Development Board told The Islamic Globe: “Islamic finance is an increasingly important part of Bahrain's economy. It now accounts for more than 10% of banking assets in Bahrain and we're also seeing particular expansion in Takaful and Shari’ah compliant fund management.”
He continued: “Clearly, the continued strength of the trillion dollar Gulf market is an important element of the industry's expansion in Bahrain. But it is important to remember that Islamic finance is now a global industry. We in Bahrain have advised over 30 countries on setting up their own Islamic finance industry. And as the industry expands worldwide, institutions like AAOIFI and IIFM, both based in Bahrain, will play a key role in making sure that regulation and standards keep pace with the growth of the industry.”
Time will tell whether Bahrain can be the top cat again, but from the noises emanating from the WIBC, Bahrain is making the right moves – economically, politically and socially – and is serious about its role at the forefront of the Islamic banking sector, as a part of the GCC community and an oasis of calm and knowledge in the wider Middle East.
source: The Islamic Globe