Diversification of Islamic Financial Instruments
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 Since concentration may be a reflection of lack of diversification, diversification strategy
can be used to reduce portfolio’s overexposure to construction and shift the focus of
Islamic banks from real estates toward new asset classes and markets, such as SMEs. In
addition to reducing NPF, advances in financial technology and innovative risk assessment
models may prove instrumental here.
 In the face of continuing uncertainties and recurrent plunges in oil prices, broadening the
base of issuers and investors of Sukuk can provide the necessary means to deepening
Islamic capital market and reducing hydrocarbons-dependency. Oman’s debut retail Sukuk
sets an example in this regards. There is also a need for innovation in Islamic capital
markets to mobilize capital beyond Sukuk.
 In this regards, it may be worth considering facilitating the listing of SMEs supported by
Tamkeen, in order to provide a larger universe of equities for investment and bring new
products and services to the Bourse. In turn, this can further improve the Bourse’s
liquidity and depth, thereby strengthening its competitiveness and enhancing its appeal.
 Financial technology can also boost the penetration of Takaful companies allow provide
access to traditionally underserved markets, such as blue-collar workers. It can also
improve profitability and pricing of risks.
3.9.7 SUMMARY
The Bahraini market has shown marked progress over the years as a leading hub for Islamic
finance. A robust regulatory framework and specialized Islamic financial institutions, along
with strong government support, have contributed to the development of a wholesome Islamic
financial system in the Kingdom. In addition to further developing existing institutions and
frameworks, it would be apt for the CBB and other stakeholders to explore non-traditional
market strategies that are in compliance with Shariah.
FinTech based platforms and solutions may serve as enablers for integration with a
burgeoning global FinTech ecosystem, particularly with an Islamic financial relevance and in
line with impact oriented strategies. The CBB has already taken steps in the form a white
paper for consultation on a Regulatory Sandbox for Fintech. New and innovative products are
critical not only to capture new markets but also to retain increasingly tech-savvy customers
demanding convenience and immediacy. Islamic financial institutions may no longer
successfully compete without investing in innovation.
FinTech may also prove instrumental amidst falling oil prices by saving banks huge amounts of
transactions costs; tapping into new sources of funds and enhancing risk assessment methods.
Not to mention the potential of actualizing the value proposition of Islamic finance and
improving Takaful outreach.