x Abu Dhabi, UAETuesday 16 January 2018

Bahrain's central bank extending lifeline to small firms

Small businesses in Bahrain affected by the recent protests are being offered a lifeline by the nation's central bank.

Rasheed al Maraj, the governor of Bahrain's central bank.
Rasheed al Maraj, the governor of Bahrain's central bank.

MANAMA // Bahrain's central bank is offering a lifeline to small businesses in the kingdom that have been hit by a drop in trade because of the protests of the past few weeks.

"We think some [businesses] will be directly affected by the events of the last month, especially consumer and tourism spending," said Rasheed al Maraj, the central bank governor, after a meeting with the chief executives of Bahrain's retail banks on Monday.

The meeting was geared towards supporting small and medium enterprises affected by the unrest.

Bahrain, the smallest Gulf economy, has struggled to regain economic stability as an exodus of expatriates takes a toll on mall and hotel operations.

Mr al Maraj said the bank held the meeting as a "pre-emptive measure … so that we manage to offer whatever is in the capacity of the bank to soothe out financial burdens", but he did not disclose how much was being set aside for the project.

"It is not a sizeable amount [being put aside], but we have an estimated figure in place," Yousif Taqi, the chief executive of Al Salam Bank, said without giving a number.

Bahrain's financial centre has also been hit by weeks of political upheaval.

"For those companies that already have financial loans and other financial commitments, we want to ensure banks are prepared so [business] doesn't have a huge financial burden," Mr al Maraj added. He said business owners had already contacted some banks about the "possibility of restructuring … to give them breathing space".

Banks have been asked to co-operate with customers to reschedule or restructure any debt, if that accommodation is needed to reduce financial burdens on their businesses.

Mr Taqi said yesterday that a proposal to offer individual and business borrowers a year of free financing was awaiting approval by his board.

The central bank, which local banks rely on for basic banking services such as cheque clearing and bank transfers, was forced to close for one day alongside most other financial organisations on March 16, when security services brought a month-long civil protest to an end.

Although local banks have reiterated that they are well-capitalised, Mr al Maraj said liquidity had been offered to the banks "if they needed it". No banks have so far requested such funding.

Finance now accounts for about a quarter of the country's GDP. The combined total assets of the Bahraini banking sector are just over US$222 billion (Dh815.39bn), according to the latest figures from the central bank.

The political turmoil triggered a series of downgradings by ratings agencies and sent debt insurance costs for Bahrain to 20-month highs, in turn harming the country's borrowing potential.

"The central bank have kept for us a certain amount of money," said Mohammed Abdulla Isa, the chief financial officer at Bank of Bahrain and Kuwait.

"They were calling us if we need liquidity and they have offered it to us but we are not in need of this," he said, adding that the amount offered ranged from $50 million to $100m for some banks, and up to $200m for others.