Creating and sustaining Islamic financial centers: Bahrain in the wake of financial and political crises

Abstract

Although primarily concentrated in countries with Muslim majorities, Islamic finance has become a global industry representing both a decentering of the global financial architecture and the emergence of an urban network that resides beyond the confines of traditional world city literature. While geographers have identified the “Mecca’s” of the Islamic finance industry – one of which is Bahrain – there remains a need to identify the factors necessary to create and sustain centers of Islamic finance. This paper examines these factors through a firm-level survey of foreign and local Islamic financial institutions in Bahrain, in conjunction with key informant interviews with representatives of these firms. We find that while Bahrain’s entrenched institutional advantages have preserved its role as a center in the Islamic financial landscape, ongoing political instability and the increasing attractiveness of new and emerging centers are threatening this role. As the country navigates the current social and political unrest, questions are raised as to what it takes to be an Islamic financial center.