Diversification of Islamic Financial Instruments
180
Takaful industry increased from 15% in 2010 to 20% in 2013, driven by demand for
investment-linked products186 .
Generally, the preferred investments of Takaful operators in the GCC are influenced by the
economy such as real estate and equity assets187. The CBB continues to play an important role
in promoting the Islamic Takaful industry both locally and globally, reaffirming Bahrain “as the
jurisdiction of choice for Takaful and Re-takaful companies” 188.
3.9.5 BEST PRACTICES, ACHIEVEMENTS AND CHALLENGES
Best Practices
Bahrain has several organizations dedicated to improving Islamic finance policy and
regulations and providing Islamic Finance training. Such organizations include the Accounting
and Auditing Organization for Islamic Financial Institutions (AAOIFI), the International
Islamic Financial Market (IIFM), the General Council for Islamic Banks and Financial
Institutions (CIBAFI), the Islamic International Rating Agency (IIRA), the Thomson Reuters
Global Islamic Finance Hub and Deloitte’s Islamic Finance Knowledge Centre189.
These key enablers, boosted by strong government support, have contributed to the
development of an expanding Islamic capital market. Moreover, CBB regulates the banking
industry to ensure economic growth and efficient allocation and mobilization of funds. For
example, in 2015, CBB launched a Shariah compliant Wakalah liquidity management
instrument aimed at absorbing the excess liquidity of local Islamic retail banks and placing it
with the central bank. The instrument was developed on the basis of a standard International
Islamic Financial market contract190 .
AAOIFI’s standard-setting efforts continue to safeguard the industry’s interests and those of its
stakeholders through regular updates and revisions on the Shariah standards in the AAOIFI
and the conferences they hold. In March 2017, AAOIFI published a draft of its accounting
standard on Murabahah and Other Deferred Payment Sales to receive constructive feedback
from the Islamic finance industry191. Similarly, in February 2017, it published a draft on the
standards of Sukuk issuance to provide details of the draft and receive feedback192.
186 Central Bank of Bahrain, The Review (December 2014), accessed 13 March 2017, see
187 Thomson Reuters, Innovation in Islamic Liquidity management, p25
188 Central Bank of Bahrain, The Review (December 2014), accessed 13 March 2017, see
189 ICD-Thomson Reuters, Islamic Finance Development Report 2015: Global Transformation, see
190 Central Bank of Bahrain, Press releases, accessed 17 March 2017, see
191 AAOIFI website, Announcement, accessed 16 March 2017, see
192 AAOIFI website, Announcement, accessed 16 March 2017, see