Shura to debate law letting firms use movable assets as collateral for business loans

TDT | Manama

Email : editor@newsofbahrain.com

Movable assets such as unpaid invoices, stock and intangible rights could be used as loan collateral under a new Secured Transactions Law that Shura councillors are due to debate on Sunday.

The proposed law aims to open another pathway to bank finance for Bahrain’s businesses, especially smaller firms.

The draft, attached to Decree No. 11 of 2025 and already cleared by Parliament, would bring in one system for security interests over movable property, backed by an electronic notice register used to record and enforce these rights and to order priorities between creditors.

Gaps

It is drawn up to close gaps between existing laws, give banks clearer tools to manage risk and allow companies to go on using assets that they pledge as security.

The Legislation and Legal Opinion Commission said the law is intended to raise Bahrain’s performance in the financial-services strand of the World Bank Group’s new Business Ready (B–READY) report, which looks at business and investment conditions across ten areas.

According to the Commission, the draft would help to organise economic dealings, protect investors’ rights and support moves to make Bahrain more attractive on global investment indices.

Proposal

The Ministry of Industry and Commerce described the proposal as part of the Economic Development Board’s programme for the private sector.

It said the text was the result of joint work between public bodies and private firms and that a secured-transactions law of this sort would let companies, in particular small and medium-sized enterprises, gain more value from their movable assets and seek cheaper funding while still using those assets in daily operations.

The ministry added that a single system for security rights over movable property, with certain kinds of asset left out in the law itself, would bring more order to economic transactions and give investors more confidence that their rights can be enforced, keeping Bahrain in view for those looking for places to invest.

Draft

Representatives of the Central Bank of Bahrain told the Financial and Economic Affairs Committee that the draft had been prepared by the concerned authorities in coordination with the Bank, which supervises financial institutions likely to be party to secured transactions and regulates some forms of collateral.

They said the purpose is to put in place an effective system for security rights over movable property and to make it easier to create those rights over such assets.

From the Bank’s side, they reported no comments on the text. The Bahrain Association of Banks supported the proposed law, saying it marks a step that would place Bahrain among regional and international front-runners in financial legislation.

Funding The Association said passing the text is needed to update the legal base for finance, deal with the difficulties many companies face when they seek funding and give banks newer tools to manage risk and widen their client base.

In its report to the chamber, the Financial and Economic Affairs Committee said the law is expected to improve Bahrain’s standing in international reports on financial services, improve the business environment, draw in investment and strengthen competition in the region.

It underlined that the new system would let private-sector institutions charge movable assets in favour of lenders without handing them over, bringing Bahrain closer to banking and finance systems in other markets that compete for investment.