Uncertainty over bank loan deferrals ‘hits businesses’ in Bahrain

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Twenty legislators led by Bahrainisation Committee chairman Ebrahim Al Nefaei have urged the Cabinet and the Central Bank of Bahrain (CBB) to defer loans until the end of the year, asserting that the move was vital to spur the market

Staff Writer, Gulf Daily News

May 11, 2022

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Bahrain - Uncertainty over bank loan deferrals has led to people cutting back on spending, leading to a slump in business, MPs have claimed.

“The CBB must take the decision before the six-month deal expires in June to pump more cash into businesses,” they said.

Parliament last month unanimously approved a proposal to defer all bank loan instalments until the end of the year for Bahrainis and local businesses and referred it to the Cabinet, which hasn’t responded to it yet.

Loans were initially deferred in 2020, from March until August, without bank charges. They were deferred four more times under optional deals in which interest was calculated from August 2020 until June this year.

Mr Al Nefaei said the aim was to allow people and businesses to ‘properly recover’ from the effects of the Covid-19 pandemic, despite positive indicators on the economy rebounding with the easing of restrictions.

Global repercussions of the Russia-Ukraine conflict are also causing concern, he said.

“People are bombarding us with calls and they want to know if loans would be deferred,” said Mr Al Nefaei.

“Many have refrained from spending following Eid Al Fitr to ensure they have enough money in their accounts when banks start deducting their loans in July.

“This has put local markets, shopping centres and businesses in a sleep mode, which is dangerous as it will deal a blow to the country’s recovery plans.

“Deferrals have helped the market by allowing cash to flow into businesses since the outbreak of the pandemic in February 2020.”

MPs are concerned that a rolling back of the decision would drastically impact citizens’ standard of living.

“Food prices have skyrocketed over the last few months,” claimed Mr Al Nefaei.

“People are struggling to make ends meet and its particularly hard for low-income families and pensioners.

“So having loans deferred for another six months and announcing it now would help citizens and businesses.”

MPs last month also unanimously approved extending bank loan instalments for up to 15 years to help people cope with a return of monthly deductions.

They want to more than double the maximum years of repayment from seven to 15.

Statistics show that the average loan payments take 44 per cent of an individual’s income.

Current loans in Bahrain have reached BD11 billion.

“The loans are close to 50pc of their monthly income and people want those handcuffs removed so they could go on with their lives without pressure,” said Mr Al Nefaei.

“Extending bank loans for up to 15 years could be the best measure as it would ease burden on people, allow banks to recover their money and ensure that market flow is balanced.”