Sharia-Compliant Banking in Bahrain

Exclusive Products and Services in Alignment with Esteemed Islamic Principles and Norms

The kingdom of Bahrain is well known for its verdant groves of date palms and has been a commercial center buzzing with activity. Though the city has abundant natural resources including pearls, oil and dates, banking is has contributed much to its growing economy.

According to Fitch Ratings, the market share of Islamic banks in Bahrain is expected to increase in 2021-2022 from 37.1% of domestic banking system assets and 17.2% of total banking system assets (including foreign assets) at end-2020.

The sector continues to be of significant importance with the total assets of Islamic banking in Bahrain reaching USD35.7 billion at the end of 2020 or about 106% of Bahrain's GDP.

Top financial institutions like Ahli United Bank, which is one of the largest Bahraini Banks are adopting Sharia-compliant principles in keeping with Islamic religious conventions and beliefs. This has propelled the growth of exclusive banking services and socially responsible investments in Bahrain.

What is Sharia Compliant Banking and what does it offer?

Sharia-compliant banking refers to a system of banking that is guided by Islamic economics. Particularly, Islamic law prohibits the payment and collection of interest since it’s unlawful to make a profit on money as it is and interest can be earned only on goods and services according to Sharia principles.

There are several models based on specific Islamic creeds that fall under Sharia-compliant accounts and all of them provide for ethics-based, transparent, realistic, and lawful banking and investment modes.

Some of the products that are offered under this are as follows:

  • Sharia-Compliant Savings Account – Depending on the model adopted by the bank, the bank invests in compliant investments and profit is distributed to customer’s accounts
  • Sharia-Compliant Current Account – Primarily for business owners and self-employed professionals, you can use it for regular banking and business transactions whilst maintaining compliance.
  • Takaful Insurance – Designed for individuals, groups, family and corporates, this insurance coverage protects against potential threats on properties, health, work and income. The key difference between conventional and Takaful insurance is that conventional coverages work on a risk-transfer model, whereas the latter is a risk-sharing model.
  • Sharia-Compliant Credit Card – On the basis of Sharia law several banks in Bahrain provide sharia-compliant credit cards that may levy a monthly profit instead of charging interest on the outstanding balance or may charge a fixed monthly fee depending on the credit card provider. The other features and benefits are the same as conventional credit cards. For late payments, a fixed amount may be charged in addition to a specific percentage of the amount that is typically donated to charity.
  • Sharia-Compliant Fixed Deposits – Since Sharia-compliant fixed deposits exclude earning interest, you can earn money through a profit-sharing agreement with the Bahraini Bank you choose to bank with. This means the money you deposit in your account is invested in Sharia-compliant financing and investments and the resultant profits generated are shared.
  • Sharia-Compliant Mutual Funds – As Sharia prohibits investment in sectors involved in alcohol, tobacco, pork, adult entertainment, weapons and gambling, the funds are invested in other sectors accordingly. In addition, Sharia funds may also not be invested in high interest-based instruments.

Being Sharia-compliant is of paramount importance for several clients and customers in Bahrain. That’s why top Bahrain Banks provide exclusive services of Islamic banking in Bahrain that are guided by an eminent panel of scholars and advisors who help the banks to conform to the stringent Islamic norms. With a full range of structured products and services, these solutions are governed by a Sharia supervisory board and audited by experts to attain the highest level of Sharia compliance.

Ahli United Bank is one such bank in Bahrain that provides an exclusive and esteemed Sharia-compliant (based on Murabaha and Ijara principles) line of products and services to its clients who are looking for top-of-the-line Islamic banking options in Bahrain.


Naveed Ali

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