Evaluation of Bahrain’s Islamic Finance Industry

Abstract

In this paper, we examine the development of the Islamic Finance industry in Bahrain for the period 2012-2014. We utilize the Islamic Finance Development Indicator (IFDI) developed by Thomson Reuters to evaluate the five components of the industry: Quantitative Development, Knowledge, Governance, Corporate Social Responsibility and Awareness. The results show a significant improvement in terms of the Quantitative Development, Knowledge, and Awareness components of Bahrain’s Islamic Finance industry. However, there is room for improvement in the Corporate Governance and the disclosure of the funds disbursed to Charity: Zakat and Qard Hasan. In respect of the various financial instruments of the industry, more focus should be dedicated to Takaful and Islamic funds as most of the development has been to Islamic banking and Sukuk. The results highlight the areas of the Islamic Finance industry that needs further improvement: Corporate Social Responsibility (CSR) and Corporate Governance