New Secured Transactions Law Opens Extra Credit Channel for SMEs

A 60-article law approved by Shura councillors on Sunday will let Bahraini businesses use receivables, stock and other movable assets as loan collateral, cutting borrowing costs for small and medium-sized firms and feeding into Bahrain’s score in the World Bank’s new business-readiness index. The council backed the bill in full, with a formal final vote due at its next sitting.

The law, attached to Decree No. 11 of 2025 and already cleared by Parliament, creates a single system for security rights over movable property, supported by an electronic notice register to record and enforce these rights and to arrange priorities between creditors. It is designed to plug gaps between existing laws, give lenders clearer tools to manage risk, and allow companies to keep using assets that have been pledged.

Committee rapporteur Hisham Al Qassab said the draft had been built with the World Bank Group’s Business Ready (B–READY) report in mind and to open the door to cheaper lending. He told the chamber: ‘The bill is designed to lift Bahrain’s performance in financial services and to support private-sector growth by helping companies secure lower-cost finance, using their movable assets as collateral while still putting them to work in the business.’

Shura Financial and Economic Affairs Committee head Khalid Al Maskati linked the bill to guidance from the top of the state. He said: ‘This law flows directly from His Majesty the King’s directive to complete the legislation needed to strengthen national security and the economy and to keep Bahrain competitive on the world stage.’ He added that the government had treated the secured-transactions bill as one of the measures to reinforce the financial and economic framework and bring in laws that support the wider legal fabric for the market by encouraging investment and freeing up more liquidity through a more flexible regime for collateral.

According to the committee, the law lays down a flexible and integrated framework for security over movable property, widening the pool of assets that can be offered as collateral beyond real estate to include receivables, inventory, and intangible assets. The electronic notice register will sit at the centre of the system, giving a way to record and enforce security rights and to make the order of priority between creditors clear.

Members also noted that the law will let secured creditors enforce against collateral outside court in cases of default, with the aim of speeding up recovery of debts, while keeping in place rules to maintain a fair balance between creditor and debtor. These cover duties of good faith, disclosure, management of the collateral, and rights to inspect and obtain information.

Legal Affairs Committee head Dalal Al Zayed said the bill spells out the scope of the regime and the procedures that must be followed, but added that close attention will still be needed when the executive regulations are written so that those who use the law can apply it clearly in practice. She pointed in particular to the focus on transparency in electronic records, saying this should reassure parties in large secured deals and shows that Bahrain is following international practice in this field.

Justice, Islamic Affairs and Waqf Minister Nawaf Al Maawda told the council that the new register must give both sides in a deal a clear view of existing pledges. ‘There has to be transparency in this register. The mortgagor and the mortgagee must be able to see clearly if goods have already been pledged to someone else,’ he said. He added that the law will only work once the technical spine is in place. ‘The systems and the codes for different movable assets have to be ready, and that is a shared responsibility between the government and all the parties who will use this law,’ he said, noting that swings in market value are part of the shared risk banks and clients already face and will be handled under rules in the executive regulations.

Shura member Dr Bassam Al Benmohammed said the coming regulations will shape how the law works in practice and called for enough time to be given for businesses and banks to adjust. ‘A large part of this law will depend on the executive regulations, which must be clear, calm the market and give every beneficiary time to adjust,’ he said, adding that the new regime ‘will give the market a positive push by providing extra liquidity, especially for small and medium-sized firms, and that will help create new jobs and support wider economic growth’.