Three small Islamic banks in Bahrain have completed a merger to create a new entity with equity of around $340m and total assets of $400m.

Capivest, Capital Management House and Elaf Bank have been in discussions about the merger since late 2011, with the Central Bank of Bahrain (CBB) encouraging the talks to help strengthen smaller banks in the country that have suffered as a result of the financial crisis. The CBB also hopes that larger Islamic banks will be able to play a more prominent role in developing Bahrain as a hub for sharia-compliant financing.

In a statement issued by Kuwait Finance House, which advised on the merger, it said “with a larger capital base, the newly created institution will be better positioned to participate in larger investments and projects”.