Banks In Bahrain Research Articles

The effectiveness of Anti-Money Laundering policies and procedures within the Banking Sector in Bahrain

Purpose The purpose of this paper is to identify the anti-money laundering (AML) policies and procedures applied by the banks operating in Bahrain and assess the effectiveness of these policies. Design/methodology/approach Data for the study came from semi-structured interviews with compliance officers in Bahrain’s banking sector. A total of 22 interviews were conducted with Bahraini money laundering reporting officers and bankers. Findings The findings indicate that the banks in Bahrain comply with international AML procedures in combating money laundering. Despite Bahrain being ranked as having strong compliance policies and AML procedures among the Gulf Cooperation Council region, there are still issues with regulatory technology that needs to be addressed. Practical implications While there has been a positive impact of AML procedures, there are always more procedures that can be taken into consideration by banks in Bahrain to have more robust mechanisms to mitigate against the threat of money laundering. Originality/value To the best of authors’ knowledge, this paper is among the first to conduct an informed study of the effectiveness of compliance in the Bahrain’s financial sector. It can be used as a foundation paper for more mix-research on money laundering threats facing Bahrain’s banks.

The Financial Statement Analysis of Commercial Banks in Bahrain: A case study of Ahli United Bank

Financial sector of kingdom of Bahrain intensely supports the growth of the economy. It contributed 27% of Bahrain GDP in 2018.The wellbeing of an economy can be examined by financial performance of the bank. Financial performance is the result of its policies and operations in monetary terms. The aim of the study is to examine the financial performance of the banks in Kingdom of Bahrain- A Case study approach. For the evaluation of the performance of bank, secondary data was collected from the annual audited report of the bank for the period of 2011 to 2017. It focuses on two important indicators the profitability and liquidity. As the shareholders are in need to maximize their return on investment and the depositors need to get back their savings according to their needs focuses on liquidity. To measure the profitability, return on asset and return on equity is the variable and loan to deposit and loan to asset to evaluate the liquidity. For this ratio analysis is being used to measure as it is evident from the previous studies. The study used percentage analysis, descriptive statistics and correlation the result of the analysis portrayed that return on asset and return on equity are positively correlated and negatively correlated with loan to asset.

Can Islamic banks sustain with a simultaneously strong conventional banking counterpart - A comparative study of financial performance of Islamic and Conventional Banks in Bahrain

Can Islamic banks sustain with a simultaneously strong conventional banking counterpart - A comparative study of financial performance of Islamic and Conventional Banks in Bahrain

HOW LARGE ARE PRODUCTIVITY DIFFERENCES BETWEEN ISLAMIC AND CONVENTIONAL BANKS?

Despite the enormous growth in Islamic banking, most studies, using DEA/Stochastic Frontier Analysis, find Islamic banks are either equally or less productive than conventional banks. We apply the Olley–Pakes (OP) and Ackerberg–Caves–Frazer (ACF) approaches for estimating the production functions of conventional, Islamic and mixed banks in Bahrain and Malaysia between 1990 and 2011. The ACF results are the most plausible. Though Islamic banks tend to be less efficient than conventional banks the difference is not statistically significant. In Malaysia, mixed banks are significantly more productive than other banks and tend to have faster productivity growth.

Financial performance of conventional and Islamic banks in Bahrain: a comparative study

The main purpose of this study is to identify the variables that influence the financial performance of both types of banks, Islamic and conventional, and compare their financial performance over the period of 2003–2016. Banks listed on the Bahrain Bourse as of December 31, 2016 were used in the study, with a total of seven banks, of which three are Islamic and four are conventional. To make an appropriate comparative study, financial ratio analysis is used. Multiple regression and paired sample t-test are used to analyze the data. Return on assets (ROA) and return on equity (ROE) are considered as the basis for measuring financial performance and are set as dependent variables. The analysis of the results shows that conventional banks perform better than Islamic banks in terms of profitability. The results also show that ROA is significantly related to risk, cost of intermediation and efficiency ratios, while ROE is highly influenced by risk ratios only. Moreover, it was found out that the relationship between asset size and the performance of banks is insignificant, while the relationship between the number of branches and both ROA and ROE is significant.

Factors Influence Banks’ Advancing Approach: Study Of Emerging Economies

The study explores the advancing approach of commercial banks of Pakistan and Bahrain influenced by different factors that include loan loss provision, profitability, financial risks, and capital requirement. Hypotheses tested using exploratory analysis and GMM panel regression applied to the data obtained from 26 commercial banks of two countries for the period FY2008 to FY2017. The results reveal a significant connection between advancing approach and loan loss provisions for banks of both countries. Further, the advancing approach establishes a meaningful adverse relationship with profitability and credit risk for banks in Pakistan and with CAR for banks in Bahrain. Overall, the study discovers loan loss provision, profitability, credit risk, and CAR as critical factors having a direct and indirect influence on banks’ advancing approaches, which is an addition to the body of knowledge. Interestingly, it observed that the banks are more inclined towards risky assets such as consumer finance must maintain a higher degree of capital adequacy ratio.

Factors Influencing Internal Shariah Audit Effectiveness: Evidence From Bahrain

It is this research’s objective to analyze factors that cause an effective internal Shariah audit among the Islamic Financial Institutions (IFIs) in Bahrain. The questionnaire method has been employed to examine the said topic. The questionnaire’s primary source of information was the Accounting and Auditing Organizations for Islamic Financial Institutions (AAOIFI) Governance Standards. Meanwhile, the respondents are consisted of 52 IFIs’ head of internal Shariah audit department. These IFIs are registered with the Central Bank of Bahrain. To analyze those relationships the structural equation method (SEM) via SmarPLS3.0 has been adopted. The study has found that the effective execution of internal Shariah audit is positively linked with the competency and performance of internal Shariah audit. Meanwhile, the other two variables, i.e. being independent and Shariah supervisory board have been discovered to be positively related with internal Shariah audit effectiveness. Nonetheless, there is no significant contribution. Overall, all the variables contribute 63.2% to IFIs’ internal Shariah audit effectiveness. The regulatory and professional bodies may benefit from this study in their assessment of factors that result in a successful and meaningful internal auditing of Shariah matters.

Inequality, concentration of wealth and ownership structure of Islamic banks

PurposeAn important Islamic imperative is prevention of concentration of wealth among a few so that wealth circulates widely to enhance shared prosperity. In contemporary economic discourse, inequality and concentration of wealth have emerged as among key causes of instability and crisis. Unfortunately, although Islamic finance has emerged as a Shari’ah-compliant industry, it does not seem to be connected with the Islamic concern about inequality and concentration of wealth. This paper aims to explore the issues of inequality and concentration of wealth in the context of Islamic finance.Design/methodology/approachThis paper addresses a number of queries: Are Islamic banks, as the dominant component of the industry, helping to improve inequality and concentration of wealth and thus offer a better framework to deal with instability and crisis? Is the ownership structure of Islamic banks conducive to meeting the Islamic imperative regarding inequality and concentration of wealth? Using secondary data, this research illuminates the pertinent issues in light of the experience of Bahrain as one of the hubs of Islamic banking and finance.FindingsThe paper finds that the ownership pattern of Islamic banks in Bahrain lends credence to the entrenched, not-so-unexpected concentration of wealth.Research limitations/implicationsThis study is based on data of one country. Further studies on other countries will help illuminate the relevant patterns and issues.Practical implicationsInequality and concentration of wealth are among central economic issues in contemporary economic discourse. Because of the significant impact of such inequality and concentration, societies need to be more aware of these impacts and devise ways to address it.Social implicationsInequality and concentration of wealth have fundamental social implications, as the issues of poverty, deprivation, exploitation, etc. are inseparable from concentration of wealth (accompanied by concentration of power), and widening wealth gap can cause or induce major socio-political upheaval.Originality/valueAlthough inequality and concentration of wealth are robust fields of inquiry, this might be the first work addressing the issue of concentration of wealth in the context of Islamic finance in general and Islamic banking in particular.

Comparative Bootstrap DEA Technical Efficiencies and Determinant Factors: Evidence From the Islamic Banks of Bahrain and United Arab Emirates

Applying the Bootstrap DEA method the paper obtained the technical efficiencies of the Islamic banks of Bahrain and the United Arab Emirates (UAE) using the panel data of 2011-2016. The paper found the 95 percent confidence interval mean bias-corrected overall technical efficiencies (OTEBC) of the Islamic banks of Bahrain was less than that of UAE. The OTEBC of Bahrain and UAE was 85.4 percent and 99.1 percent respectively suggesting the average inefficiency (14.6 percent) of the Islamic banks of Bahrain was higher than that (0.5 percent) of the UAE bank and the difference was significant. The paper applied the Simar-Wilson regression (both sided truncated) for determining the efficiency factors. The regression results of pooled data found that non-performance loan to total assets (NPLTA), loan to total assets (LOATA), profitability index (ROA), and bank-size (LOGTA) were significant factors. The regression results found that the efficiency of the Islamic banks was positively related to ROA and negatively related to NPLTA, LOANTA, DEPTA, and LOGTA. Results of regression, running the regression separately for Bahrain and UAE, confirmed the findings of pooled results. The country wise regression results of the Bahrain and UAE Islamic banks found that the NPLTA, LOATA, and LOGTA were significant factors and they are negatively related to the efficiency of the Islamic banks. The finding of this paper that LOANTA was negatively related to bank TE supported the finding of Zelenyuk (2015).

The impact of strategic planning on enhancing the strategic performance of banks: evidence from Bahrain

This study aims to test the impact of strategic planning on enhancing the strategic performance of Bahraini banks. The study has two variables. The strategic planning as an independent variable includes a group of four perspectives, namely environmental scanning, strategy formulation, strategy implementation, and strategy evaluation. The strategic performance as a dependent variable also includes a group of four perspectives: financial, customer, internal business process, and learning and growth. The sample of the study consists of the employees of 10 of all the 12 commercial banks in Bahrain. A questionnaire was developed to gather the data. Five questionnaires were distributed to each bank totaling 50 questionnaires. The results showed that the strategic planning has a good statistically significant impact on financial, customer, and learning and growth. The results also showed a medium statistically significant impact of strategic planning on internal business process. The research recommended focusing on all aspects of the strategic performance in the banks under study, specifically the internal business process perspective.

Empowerment and its Relation with the Job Performance Among the Bank Employees in the Kingdom of Bahrain

Empowerment of employees give them the power and responsibility in order to enhance their self-confidence and give them freedom to perform well. The performance of employees is the final product sought by all organizations, which is an indicator for success and failure. The primary objective of this study is to assess the extents of empowerment and the level of job performance among the bank employees in the Kingdom of Bahrain and if there is a significant correlation between both variables. The descriptive study was based on surveying 250 employees and managers from 5 main banks in Bahrain. The questionnaire measured the empowerment level as well as the job performance level among the respondents and the correlation between them. As considered the main two variables of the study. The survey questionnaire was developed and modified by the researcher according to the scope of the study. The response rate was 80%. The study data and hypotheses were examined by statistical analysis done on SPSS 25.0. Most of the respondents found that the level of empowerment and job performance were at very high level in banks in Bahrain. The study found a strong correlation between empowerment of employees and job performance. Thus, the alternative hypothesis was accepted. The findings support the high level of empowerment of employees and job performance and there is a strong correlation between them.

Sectoral Distribution and Islamic Finance: Comparative Study of Conventional and Islamic Banks in Bahrain

The proponents of Islamic finance argue that unlike conventional finance it emphasizes the real economy. Such emphasis should be reflected in the sectoral distribution in an economy. In this paper, in light of a conceptualization of the real economy, the sectoral distribution of financial activities of conventional and Islamic banks in Bahrain is explored. The paper uses the data available from the Central Bank of Bahrain (CBB) regarding the sectoral distribution in both conventional and Islamic banks. The breakdown of banks into both retail and wholesale banks as well as onshore and offshore banks is examined to identify any important trends or patterns in light of the conceptualization of the real economy. The analysis of data finds certain concentration in the real estate sector. Islamic banks also have a bias toward consumer finance, which has implications in promoting a debt culture. Several other gaps between the commonly proclaimed merits of Islamic finance and the praxis in reality are also identified. The research is based on a single country, Bahrain, a financial hub for both conventional and Islamic banks. Even though Bahrain has a diversified economy, it is still limited in terms of some key sectors, such as manufacturing and agriculture. Thus, broader study including other countries with major presence of Islamic banks would be the next step in this research. Bias to certain sectors can be problematic in case of a potential crisis. Also, in certain respects, such as bias of Islamic banks toward consumer finance, it might be serving to promote debt culture that many developed countries are already beset with. The research can create better awareness about various patterns of sectoral distribution.

Establishment of The First WAQF Bank in Bahrain: Exploratory Study

This paper surveys awqaf over a historical and geographical trajectory as a backdrop to exploring the lineaments of a new waqf bank. The Kingdom of Bahrain is on the cusp of founding a new waqf bank but many issues with respect to creation of a waqf bank need to be threshed out and limned in detail. To this end, a survey was designed and distributed to key decision-makers in the Islamic Financial Institutions (IFIs) in Bahrain to obtain their feedback about the possibility to establish the first Waqf (Endowment) Bank of Bahrain along three axes; .1) proposed structure; 2) sources of capital and 3) recommended modes of financial transactions. 67% of IFIs responded and questionnaires filled out by 12 IFIs were analyzed in terms of descriptive statistics. The result of the survey indicate substantial support among IFIs for the creation in Bahrain of a waqf bank, organized as a domestic and international investment and development bank, with financings drawn primarily from Muslim sources and public banks (CBB) and secondarily from all corporations (be they Islamic or non-Islamic. Preferred legal status would be as an independent corporation. IFI informants suggest that the new waqf bank would be licensed to conduct a wide variety of Islamic transactions, with a strong preference in favor of direct investment with equity participation but, notably, exclusive of engaging in loans with service charges. This study should prove utile to the Central Bank of Bahrain (CBB) in determining how to set up a new waqf bank in line with a need to craft new guidelines and regulatory measures covering operations of such new Islamic financial entities. In addition, this study should be particularly relevant to central banking authorities considering in Islamic economies of whether, and how to, go about formation of waqf banks in their jurisdictions in Bahrain for strategizing and encouraging the establishment of the Waqf Bank.

The compliance of disclosure with AAOIFI financial accounting standards

PurposeThis paper aims to examine the compliance of disclosure with the financial accounting standards of the Accounting and Auditing Organisation for Islamic Financial Institutions’ (AAOIFI) related to Islamic financing products by Islamic banks in Bahrain and Qatar.Design/methodology/approachThe study measures compliance using disclosure indexes. The disclosure indexes include the three financial accounting standards of Murabaha, Mudaraba and Musharaka. The data are collected from the annual reports of 24 Islamic banks in Bahrain and Qatar over a period of 2012-2015.FindingsThe paper found that Islamic banks in Bahrain and Qatar comply with AAOIFI financial accounting standards related to Murabaha, Mudaraba and Musharaka. However, there was a level of non-compliance in both countries. In addition, it found that the extent of compliance had increased over the 2012-2015 period. Also, the Murabaha standard had the highest mean of compliance. Moreover, the results showed that the Islamic banks in Qatar tend to have more compliance of overall Murabaha and Mudaraba disclosures compared to the Islamic banks in Bahrain.Research limitations/implicationsThe findings are preliminary and highlight that the issue is of high interest to Islamic banks and AAOIFI. Hence, it requires a detailed follow-up to form a complete picture that would assist AAOIFI and regulators gear their policies toward better quality disclosure by Islamic financial institutions. Even though the findings are encouraging, future research is recommended to enforce compliance with the AAOIFI financial accounting standards.Originality/valueThis is a pioneer empirical study that focuses on the level and trend of compliance with AAOIFI financial accounting standards related to the Islamic financing products of Murabaha, Mudaraba and Musharaka standards, especially in Qatar. Additionally, it is the first study comparing between the only two Gulf Cooperation Council (GCC) countries, i.e. Bahrain and Qatar, that mandatory apply the AAOIFI standards.

Impact of Time Value of Money Theory in Ijarah Sukuk Genuineness: the Case of Bahrain and Malaysia

This research is a case study of two Ijarah Sukuk issuances in two countries. One issued by central bank of Bahrain and matured in 2014 and the other was issued by the Malaysian company TSH Resources Bhd and matured in 2017. By adopting library research and document analaysis, this research examines the terms and conditions of both cases based on what has been disclosed in the prospectuses. Accordingly, this study presents the impact of the Time Value of Money (TVM) in these cases and how it differentiates between genuine Ijarah Sukuk and a duplicate-bond Sukuk. The study revealed that there were some Shari’ah non-compliance issues in the implementation of Sukuk concept in both cases in a way it emulates conventional instruments featured as guaranteed-return instruments, which take into account TVM as an essential compenent in calculating its returns. However, such practice has a major effect on the genuineness of Sukuk, in terms of Shari’ah-compliance risk.

Do board characteristics affect bank performance? Evidence from the Bahrain Islamic banks

PurposeAlthough most previous studies interested in Islamic banks have focused on quantitative aspects such as performance, risk and stability, this paper aims to deal with the institutional dimension and focus precisely on the link between board characteristics and bank performance.Design/methodology/approachBased on a data related to 13 banks in Bahrain observed over the period of 2005-2011, this study investigates the impact of board directors on the level of performance. To this end, the authors have used two empirical approaches. The first one is the panel data analysis with regard to random effect (RE) regression. The second one is the generalized method of moments (GMM) in system, which checked the soundness of the first result.FindingsThe result of RE regression indicates that the board duality is positively and significantly correlated with the bank performance for both ROA (return on assets) and ROE (return on equity). However, the board size exerts a positive and significant impact only when profitability is measured by ROE. The authors find that regression with GMM in system confirms the RE result exclusively for ROE. Findings also indicate that a financial crisis exerts a negative but not significant effect on bank performance.Practical implicationsThese findings are relevant to both policymakers and regulators. Islamic banks in Bahrain should grant more importance to the structure and the quality of the board to improve their performance.Originality/valueThis study aims to extend the existing literature by focusing about the role of the Shariah board in bank performance.

Application of RODRIGO Model for the Preparation of Income Statement on the Bases of the Structural-Secondary Profits: Field Study of the Published Financial Reports of the National Bank of Bahrain 2009-2010

Application of RODRIGO Model for the Preparation of Income Statement on the Bases of the Structural-Secondary Profits: Field Study of the Published Financial Reports of the National Bank of Bahrain 2009-2010

Does Liquidity Influence Profitability in Islamic Banks of Bahrain: An Empirical Study?

This study examines the impact of liquidity on Islamic banks’ profitability during the years from 2010 to 2015. The study extracted its data from the annual reports of six Islamic banks in Bahrain that have been in operations on or before 2010 to 2015. The liquidity model is built from four liquidity variables namely cash & due from banks to total assets (CDTA), cash & due from banks to total deposits (CDTD), investment to total assets (INVSTA) and investment to total deposits (INVSTD). According to adjusted R squares profitability variables return on assets (ROA), return on equity (ROE) and return on deposits (ROD) are respectively 16.2%, 3.1% and 21.3% dependent on liquidity variables.The results of the study show that CDTD and INVESTD are correlated positively with ROE. In addition, CDTD, INVSTA indicate a negative correlation with ROE. Thus, only INVSTA and INVSTD found to be significant with ROE at 0.05 significant level. Durbin-Watson test shows that the residuals are uncorrelated since its value is approximately very close to 2. However, according to the P-value, the overall liquidity model (Model 2) is not significantly related with ROE. Thus, the null hypothesis (H0) is accepted and the alternative hypothesis is rejected for the ROE. Furthermore, the results in the table show that CDTA and INVESTD are positively correlated with ROD, and negatively with CDTA and INVSTA, and CDTA is the only insignificant variable. CDTD is significantly related with ROD at 10%. Durbin-Watson test shows that the residuals are positive auto - correlated since its value is approximately very close to 1. However, according to the P-value, the overall liquidity model (Model 3), is significantly related with ROD at 1% level.The researcher recommended for further studies to add more liquidity variables to the model so as to enhance and enrich Islamic banks outlook.

Evolving of Selected Integrated Reporting Capitals among Listed Bahraini Banks

The main aim of this study is to identify the level of implementation of Integrated Reporting (IR) in Bahraini banking sector by measuring disclosure level in the banks’ annual reports. To achieve this, a sample of banking sector was analyzed, thereby evaluated the degree of implementation of this new corporate financial reporting tool through a checklist followed by previous studies. The study considered a sample of 12 listed banks in Bahrain Bourse. Banks financial reports were examined for the two years 2014 and 2015. The results show that, there is an average implementation level of IR 65.54% and 67.79% for the years 2014 and 2015, respectively. The result shows a slight increase in the implementation of IR from 2014 to 2015. This implementation level among banks in Bahrain is considered relatively average (medium). BBK took the top rank with a disclosure percentage of 70.27 % and 75.68 % in both years with a relatively small statistical variance in disclosure has been found between rest of the banks. The study further found that intellectual capital is the most disclosed panel that varied from 64.8% and 72.2% in 2014 and 2015 respectively.

Smoking behavior of males attending the quit tobacco clinics in Bahrain and their knowledge on tobacco smoking health hazards

BackgroundOne third of Bahraini adult (20–64 years) males and 7.0% of females use some form of tobacco. The corresponding rates for cigarette and waterpipe tobacco smoking (WTS) are 11.0% and 6.0%, respectively. The objective of the study was to determine the knowledge on tobacco smoking and past smoking related behavior of male patients attending the Quit Tobacco Clinics (QTC) in Bahrain.MethodsA sample of 339 male clinic attendees was taken proportional to the population distribution in the three QTC at Al Hoora Health Center, Hamad Kanoo Health Center, and Bank of Bahrain and Kuwait Health Center. Data collection was performed until the sample size was completed (September 2015 to December 2016). Knowledge on the health effects of cigarette and WTS was examined based on 10 statements on cigarette and similar ones on WTS. Respondents “agreeing” with the statements were considered knowledgeable and those “disagreeing” or responding “don’t know”, not knowledgeable. All the “agree” responses for cigarette/WTS were summed across the 10 health effects and average health knowledge scores for cigarette/WTS were computed.ResultsMost of the study participants were Bahraini nationals, ever married and educated with at least secondary level. The majority (65.8%) of participants smoked a single type of tobacco product, and the rest, two (28.0%) or three or more (6.2%). Age of starting cigarette and WTS was 16.2 ± 4.0 and 19.3 ± 6.7 years, respectively. The majority (81%) smoked in the presence of other family members and 26.3% in the presence of a child. 76.2% smoked in the presence of others in their cars. 18.9% of the attendees had quit smoking at the time of interview. 81% of the participants knew about the hazards of both cigarette and WTS with a significantly higher (p = 0.0001) mean knowledge score for cigarette (93.3 ± 3.0%) than WTS (85.2 ± 2.1%).ConclusionThe relative lack of knowledge on the hazards of WTS in a sample of Arab country population with an increasing trend of WTS warrants the attention of health policy makers in the country and region.