Personal loans warning by Central Bank of Bahrain

PERSONAL loans have surged to an unprecedented level in Bahrain, the Central Bank of Bahrain (CBB) has warned.

They amounted to BD5.7 billion by the end of February this year, representing 50.4 per cent of the total value of outstanding loans, it said.

In an important move to control consumer credit in the Bahraini banking market and protect the consumer from debt burden, the CBB issued directives to set a ceiling on debt to total income ratio.

The ceiling aimed to serve the interest of bank customers and limit credit operations granted in return for encouraging investment, it said in response to the parliamentary investigation committee’s inquiries about falling living standards.

Under these directives, in case banks and financing companies provided any credit facilities to individuals with income below BD3,000, the total monthly instalment of credit facilities should not exceed 50pc of the customer’s total monthly income, the bank noted.

People borrowing from unlicensed parties was a personal choice and exposed providers of such funds to legal accountability, as these practices were considered illegal and there was no mechanism to control them because they were not subject to the supervision of official authorities, the CBB said.

The bank said laws were being updated regularly to achieve financial stability in the kingdom and protect financial institutions, citizens and the local economy from any negative internal and external fluctuations.

Also, over the years, several types of licences have been issued for financial services to improve competitiveness in the local market, which has led to diversification and improvement of services and their prices as well as fees levied on consumers.

Thirty licences were issued for retail banks, 31 for insurance companies, 47 for investment companies, 18 for money-exchange offices, seven for financing companies, two for microfinance institutions, and 30 licences for supporting financial institutions that provide various financial services to citizens.

The bank indicated that keeping Bahrain currency pegged to the US dollar had contributed to the stability of transactions and transfers.




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