The Bahrain Development Bank

The Bahrain Development Bank Last updated on Wednesday 14th April 2010

A key element of the government's development strategy for the country can be found in the creation of the Bahrain Development Bank (BDB). Since its beginning in 1992, the BDB has worked closely with aspiring and existing entrepreneurs to help start new projects and businesses. Its task is to create viable manufacturing and service employment for Bahrainis and exports from Bahrain by mobilizing capital and formulating new schemes for commercial projects.

The shareholders of the BDB include the government, the local commercial banks and private sector manufacturers. Under the terms of the bank's formation, in addition to an initial paid-in equity capital of BD10 million, some BD4 million of twenty year loan funding is being provided by government every year for 10 years to increase the bank's loan and equity capital base to BD50 million.

Though the government has provided 60% of the paid-in equity, it has taken only four of the eight seats on the board. The rationale behind this is to encourage the fullest participation from the commercial banking and private sectors. To this end, the general managers of the two largest Bahraini commercial banks are both directors.

Because it has no small retail depositors, the bank is free under Bahraini law to lend without the collateral of cash, real estate or publicly quoted shares. The bank can also subscribe for equity, adding value to its investment through provision of a whole range of services and a board nominee in the way of a development capital fund.

The interest rates are also extremely attractive -- only 4% per annum for small businesses and 5% for larger ones. Commercial rates in Bahrain for the same size business are considerably higher and will rise with the market rates whereas the bank's rates will be held down.

The Bahrain Development Bank soon proved its value to the local economy. By the autumn of 1993, it had processed more than 200 applications and serious inquiries for funding. Some 50 loans whose total cost was in excess of BD33 million, involving an exposure of BD6 million, had been approved. Other equally important roles as seen by the bank's officers and directors are to mobilize project ideas, to attract foreign investment and to facilitate new projects. The bank has also recently moved into bigger and more important industrial schemes with a project cost of up to US$50 million.

Since the whole aim of establishing the BDB was to encourage new and existing industries in assessing new projects, no discrimination is made between local, joint venture or 100% foreign-owned enterprises. All are welcome. The Bahrain Development Bank works closely with the Bahrain Marketing and Promotions Office (BMPO).

As the country's national marketing and promotions organization, BMPO is responsible for coordinating public and private sector initiatives, attracting direct foreign investment and supporting Bahraini exporters in identifying and developing new export market opportunities. In fact, the BMPO offices are on the fourth floor of the Bahrain Development Bank Tower.

As a mobilizer of funds, the BDB is able to arrange substantial packages of finance for large projects. It can also provide loan, equity and consultancy advice on its own behalf. It offers an independent view based on the highest professional standards.

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