Bahrain - Shura Council has unanimously approved the Secured Transactions Bill – a sweeping legislation that introduces stronger penalties, expands access to credit for businesses, and modernises Bahrain’s financial legal framework.

The bill will be put to a final vote next week to refer to His Majesty King Hamad for ratification.

Justice, Islamic Affairs and Endowments Minister Nawaf Al Maawda yesterday highlighted the importance of the bill. He underscored the risks of relying on unregulated collateral practices, particularly when property is used as a bank guarantee.

“Property is not subject to fixed or stable valuation and when it is used as collateral without clear regulatory controls, its market value can fluctuate sharply,” he said.

“The new law ensures that whenever a borrower defaults, the collateral is properly safeguarded and enforceable. These issues will be fully regulated through the executive bylaws once the law comes into effect.”

He stressed that the law would also result in establishing practical mechanisms that guarantee security and clarity for all parties.

“We want a flexible system, but it must be secure, especially when dealing with small and medium enterprises (SMEs),” he added.

The bill sets out jail terms of up to two years and fines ranging from BD1,000 to BD50,000 for individuals, and BD2,000 to BD100,000 for entities that engage in violations such as concealing collateral, falsifying registry information or obstructing creditor rights.

According to the Shura’s financial and economic affairs committee, these punishments are essential for maintaining integrity, transparency and trust within Bahrain’s secured lending ecosystem.

Committee chairman Khalid Al Maskati stressed the economic importance of the reforms.

“A secured lending framework only works if all parties trust that collateral cannot be hidden, manipulated or misrepresented,” he said.

“The jail terms and fines are essential deterrents that protect creditor rights and preserve the integrity of Bahrain’s financial sector.”

Mr Al Maskati added that introducing the law aligns with Bahrain’s national priorities.

“As Bahrain positions itself to attract new investment and support private-sector growth, the Secured Transactions Bill is being seen as a transformative reform – one that promises a more efficient, transparent and trusted credit environment for years to come,” he said.

The bill allows companies to use movable assets – such as receivables, inventory, equipment and intellectual property – as collateral without transferring possession, enabling SMEs to unlock financing even when they lack real estate or fixed assets.

Committee rapporteur Hisham Al Qassab said the new law represents a major step towards improving Bahrain’s global standing in business-readiness indicators, particularly in the World Bank’s new B-READY assessment.

“The law establishes a unified system governing security rights over all types of movable assets,” he said. “It closes legal gaps, prevents conflicts between existing laws, encourages investment and strengthens Bahrain’s position as an attractive destination for global capital.”

Shura members widely welcomed the bill as a long-awaited upgrade to Bahrain’s financial architecture.

Member Ali Al Aradi said the law directly addresses real challenges faced by companies seeking financing.

“It gives banks modern risk-management tools, expands the base of acceptable collateral, and ensures clear registration and enforcement of security rights,” he added.

Shura first vice-chairman Jamal Fakhro urged authorities to accelerate the rollout.

“We must ensure traders can benefit as soon as possible,” he said, adding that SMEs need strong oversight to ensure loans backed by movable collateral are used responsibly.

The law will come into force 12 months after its publication in the Official Gazette, allowing time for executive regulations and public awareness campaigns.

Copyright 2022 Al Hilal Publishing and Marketing Group Provided by SyndiGate Media Inc. (Syndigate.info).