MANAMA: Banks in Bahrain must play a major role in helping the national economy recover from the global coronavirus (Covid-19) outbreak and, to do so effectively, will need the ongoing support of all stakeholders, particularly the government, said a senior Bahrain banker.
Ahmed Abdul Rahim, who is the chief executive of Ithmaar Bank, said this shared focus on economic recovery will help shape the kingdom’s new, post-Covid-19 reality and pave the way for continued economic growth and prosperity.
“For our part, banks must recognise the important role we must play in helping ease the economy back to its earlier growth trajectory and, perhaps more importantly, helping both individuals and businesses absorb and, ultimately, recover from the economic impact of Covid-19,” said Mr Abdul Rahim.
“We must recognise the importance of actively supporting the communities in which we operate, and we must always remember that we are all in this together,” he said.
“To play their role effectively, banks are, in turn, supported by the decisions taken by government and the Central Bank of Bahrain (CBB), the kingdom’s banking and financial services regulatory, to protect the stability of the national economy,” said Mr Abdul Rahim.
“This included decisions to cut interest rates and to reduce reserve requirements. Together, these decisions provided banks the flexibility necessary to support national efforts to absorb the economic impact of the pandemic,” he said.
“One such initiative was the six-month deferment of financing instalments,” said Mr Abdul Rahim.
“This went a long way in helping both individual and corporate customers absorb the economic impact of the outbreak and, subsequently, avoid a dangerous economic downward spiral that would have had a catastrophic effect on the national economy,” he said.
“This same initiative however effectively eliminated liquidity from the banking and financial services industry, potentially stopping banks from being able to service their own financial obligations or, at the very least, dramatically reducing their ability to provide new financing for their clients,” said Mr Abdul Rahim.
“This would have had an equally catastrophic effect on the national economy if the CBB had not stepped in to provide the necessary liquidity. It is an example of the type of support and close co-operation necessary to help steer the economy back on track,” he said.
“For banks, the most immediate focus will be on preparing for the end of the installment deferment period,” said Mr Abdul Rahim.
“It is important to ensure that we do everything possible to ensure that both individuals and businesses can ease back into addressing their financial obligations. To do so, some banks in Bahrain are developing several programmes to help ease the transition, including restructuring funds, reducing instalments and other initiatives that will help to improve the financial position,” he said.
“With oil prices falling to unprecedented levels and the global Covid-19 pandemic slowing the world economy to a trickle, we must also work to find new opportunities.
“Rating agencies are forecasting significant economic contraction across the world, with S&P Global Ratings, for example, predicting that Bahrain’s economy will shrink a full five per cent in 2020 alone,” he said.
“To counter this slowdown, we must look at alternative models and reconsider how we do things.
“Fintech, for example, has been a recent buzzword, with everyone talking about how it will transform the banking industry and lead to dramatic changes in the way transactions are conducted. It is time to accelerate this transformation with a clear focus on implementing the technology necessary to ensure business continuity.”
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