The development of Islamic banking and finance in Bahrain is argued under three wide but interconnected headings. These are regulation, operation, and education. Islamic institutions have long accepted the need to found a regulatory system that is industry-characteristic but built to a standard that compares favorably with worldwide best applications in the regulation of conventional financial foundations. The Islamic financial industry successfully perceives the immediate requirement to plan financial instruments acceptable to the sharia in order to help institutions handle liquidity and investment precedencies and to supply markets where those instruments may be dealt. The Islamic financial society requires to prove the world that it is a capable rival to conventional finance and has undertake for achievement and growth. In this view, Islamic finance ought to accept its principal obligation for human wealth development and public education, and to invest appropriately.
When we examine the development of Islamic banking and finance in Bahrain, as we mentioned above, it is important to take into consideration three wide but interconnected aspects: regulation, operation, and education. All three of these aspects are good pointers of the growth and perfection of Bahrain’s Islamic finance industry.
The Bahrain Monetary Agency, the central bank of the Kingdom of Bahrain, has the legal regulatory obligation for the banking industry, and hence regulates Islamic foundations that carry on banking and financial jobs in the Kingdom. While strict regulation is every time the chief aim of the authorities, it is also an important involvement of all the institutions authorized by the agency, covering the Islamic institutions. This reciprocal interest supports the superiority of Bahrain’s global regulatory status . The free acceptance of both the conceptual and the practical execution of a tight regulatory system is a obvious indication of the perfection of these institutions. Islamic institutions have long admitted that the requirement to construct a regulatory system that is industry-characteristic, transparent, and maintained to a standard that is corresponding to the best of global practices. In fact, since the foundation of the first Islamic bank in 1975, comprehensive efforts were made to improve such a model.
The agency has been conscious that the model of liquidity administration is less effective for Islamic foundations than for conventional functionings. The capability of conventional banks to use short-term instruments to take in liquidity excesses or reduce shortages is a long-established organization that empowers the effective working of capital markets. It has given these institutions the profit of a central bank and loaner of last-resort operations: a fragile, yet adaptable, system that can be tied up for the reciprocal profits of all parties. These instruments are not used by Islamic foundations, being structured on the basis of delayed financial recompense for expenditure.