Manama, Bahrain - 06th May 2015 - The Waqf Fund held its 8th Roundtable Discussion on "Venture Capital - Building the Next Phase of Economic Development in Bahrain" at the CBB premises. The half-day session was attended by a select group of 39 senior professionals including CEOs of Islamic banks, entrepreneurs, academics, Shari'a scholars, CBB officials, AAOIFI, CIBAFI, audit firms and law firms.

The Roundtable started with presentations from the CBB and Venture Capital Bank, outlining the concept and the reasons why venture capital industry is important to build to next the phase of economic growth in Bahrain and the wider GCC region. The Bahrain experience in venture capital was also shared with the participants. Mr. Ralph Kietel from International Finance Corporation informed the audience about the experiences, best practices and role models in this area. Mr. Ihsan Jawad, the founder of Zawya shared his experience as an entrepreneur and later as a venture capitalist. After the presentations the participants openly shared their views on the subject and the discussion went on for nearly two hours.

The key takeaways from the Roundtable are as follows:

Venture capital is an important industry that needs to be further developed in Bahrain and the GCC not only because of the financial returns but also due to the economic and social benefits it brings (e.g. job creation).

An ecosystem is needed to create a vibrant venture capital industry, which includes favorable regulatory, accounting, legal and tax environment, availability of skilled resources, close link between the academia and the industry, availability of exit avenues through capital market and cultural acceptance of failure. It may take several years to build a healthy venture capital ecosystem with patience and consistency if no high level intervention is involved.

There is a strong case for the government to kick start the venture capital industry by providing matching funds, setting up incubators, incentivizing and developing talent and other measures in line with other countries' experiences where the government led the development of such industry and the private sector followed.

A change of mindset is required among capital owners of the region; the availability of institutional risk capital to entrepreneurs with talent, ideas and experience can be a game-changer for the region's economies and people.

Bahrain and the GCC region should adapt some aspects of the global venture capital role model and customize it to suit the region's needs, e.g. focus more on SMEs rather than high technology sectors, encourage corporate venture capital, encourage sovereign wealth funds to increase their allocation for alternative asset class, have specific government intervention where needed, etc.

Venture capital is true Musharaka in spirit and should therefore be encouraged by Islamic financial institutions; however, more research may be needed to ascertain the Shari'a legitimacy of certain tools and structures used by venture capital companies (e.g. preference shares, drag along and tag along rights, etc.).   

Retail Islamic banks may carefully think before participating in venture capital as the high risk nature of the business may not be in line with the unsophisticated retail money they are entrusted with.

The GCC region is witnessing selective successes in the digital media and mobile applications space; such stories should be picked up by the media and celebrated in order to create role models for the youth of the region.

Universities need to introduce courses on entrepreneurship and invest more on research and development with emphasis on applied research.

Bahrain Investment Market, announced recently by the Bahrain Bourse, is a good platform to facilitate exit avenues for small to medium sized companies.

The conclusions reached and recommendations provided by the Roundtable Discussion will be compiled by the Waqf Fund for further consideration of the relevant authorities.

Central Bank of Bahrain (CBB)
Contact: External Communications Unit
Tel: +973 17547357/17547360

© Press Release 2015