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.


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