Uncertainty over bank loan deferrals ‘hits businesses’ in Bahrain

Bahrain – Uncertainty over bank loan deferrals has led people to cut back on spending, leading to a slump in business, MPs have claimed.

Twenty lawmakers led by Bahrainization Commission Chairman Ebrahim Al Nefaei have urged the Cabinet and the Central Bank of Bahrain (CBB) to postpone loans until the end of the year, saying the move is vital to stimulate the market.

“The CBB must take the decision before the six-month deal expires in June to inject more cash into the businesses,” they said.

Parliament last month unanimously approved a proposal to defer all bank loan disbursements until the end of the year for Bahrainis and local businesses and sent it back to the Cabinet, which does not hasn’t answered it yet.

The loans were initially deferred in 2020, from March to August, without bank charges. They were postponed four more times under optional agreements in which interest was calculated from August 2020 to June this year.

Mr Al Nefaei said the aim was to enable people and businesses to “recover properly” from the effects of the Covid-19 pandemic, despite positive indicators on the economy rebounding with the easing of restrictions .

There are also concerns about the global repercussions of the Russian-Ukrainian conflict, he said.

“People are bombarding us with calls and they want to know if the loans will be postponed,” Mr Al Nefaei said.

“Many refrained from spending after Eid Al Fitr to ensure they have enough money in their accounts when banks start deducting their loans in July.

“It has put local markets, malls and businesses on standby, which is dangerous as it will be a blow to the country’s recovery plans.

“Deferrals have helped the market by allowing cash to flow into businesses since the pandemic hit in February 2020.”

MEPs fear that a reversal of the decision would have a huge impact on citizens’ standard of living.

“Food prices have skyrocketed in recent months,” Al Nefaei said.

“People are struggling to make ends meet and it’s particularly difficult for low-income families and pensioners.

“So having loans deferred for another six months and announcing it now would help citizens and businesses.”

Last month MPs also unanimously approved extending bank loan installments for up to 15 years to help people cope with a return of monthly deductions.

They want to more than double the maximum number of repayment years from seven to 15.

Statistics show that average loan repayments are 44% of an individual’s income.

Outstanding loans to Bahrain have reached BD 11 billion.

“Loans are almost 50% of their monthly income and people want those handcuffs removed so they can go on with their lives without pressure,” Mr Al Nefaei said.

“Extending bank loans for up to 15 years might be the best measure because it would ease the burden on people, allow banks to get their money back and ensure balanced market flows.”

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