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Bahrain is a tine Islamic country in the Middle East with a population of under 1.5 million. Around half of the population is Bahraini Arab with the remaining population being foreigners. The country's Governing bank is the Central Bank of Bahrain. Its job is to manage the countries banks in concerns to the regulations they must follow, and beyond this, it acts as the government bank, whose duties include:
These are covered under Article 3 of the Central Bank of Bahrain Financial Institution Law, and article 4 outlines its further powers and duties.
Loans can be taken from any bank within the country whether they are Islamic Banks or conventional Banks and they are available to both Nationals of the country and foreigners. There will be some differences between the loans for a national and a foreigner, though this practical guide covers the procedure for a foreigner.
Steps to Obtaining a Loan
Documentation:
The following list outlines the documentation which will likely be required
There are also other requirements such as:
Once these documents are available, the bank can be approached, and they will analyze the documents. There will be specific standards that will also be expected from an individual such as a minimum salary requirement which is generally around BD 200 and the bank may specifically have other conditions, and may ask specific questions before proceeding. The banks are required by CBB law to look into whether an individual is in a position to receive a loan. As such, the banks are very much in a position to deny a loan to a customer if they feel they do not meet the required standards
Before approaching a bank, an individual should first know what type of loan they are looking for. These often range from car loans to housing loans all the way to ordinary personal finance
Once all of this is known, the bank will be willing to consider the loan.
Types of loans:
The maximum duration of a loan in Bahrain is 84 months (7 years) for an expatriate. The loans are limited to the value of an individual’s end of service pay and benefits, or up to a maximum of BD 100,000. There are different types of loans including:
Interest:
The interest rates and profit rates of a bank must be made clear by said bank to the customer before the loan is issued. This is mentioned in the Code of best practice on consumer credit and charging. Section D covers the matter, and part 1 states that the employees of the bank should make clear where the customer can find the interest rate.
Part two covers 2 points:
Part 4 indicates that the websites should show a bank's interest rates, and this is further covered in Part 6 which states that any changes to the rates should be updated on the website within two days. The old standards should also remain available so that individuals can compare the differences
Further to this, customers should be informed of any upcoming changes to the interest rates if it is necessary even before those new rates take effect. This is according to part 5 of section D.
The contract:
Once all the formalities and details have been finalized, the Bank and customer will then agree to the loan, and an agreement will be drawn up. It will contain the start and end dates of the loan, the monthly installment amounts and other essential details.
The individual can at this stage also take out insurance on the loan if the bank offers it and this could help secure both the bank and the individual in case of accidents or other unfortunate occurrences.
On top of this, the loan will have to be secured against the individual’s salary or end of service indemnity, which will ensure the loan will be repayable to the bank in the case that the foreigner loses their job.
As a whole, the process of obtaining a loan in Bahrain is quite straightforward and simple. It is possible at any bank with varying and competitive interest rates. The method of applying for a loan can commence through a variety of portals, including online, visiting a branch of the bank or a phone call. The paperwork requirements aren't anything outrageous and the other conditions such as age, are nothing unexpected or unusual. The customer must be well informed of the interest rates and potential changes to them throughout the duration of the loan, which allows for high transparency, and once these steps are completed and both parties are happy to proceed the loan can be issued.
Regarding laws, much like the other GCC countries, they are managed by the country's central bank. As such there are many similar rules for the banks to follow when giving loans. The central bank keeps all of the legislation relating to the financial institutions in the country on its webpage, and it also regularly sends out circulars to these institutions updating them on the arising situations
Glossary