Bahraini regulators have given a licence to the Dallah Albaraka group to set up an offshore holding company on the island, which will control the private Saudi group's worldwide network of Islamic banks. The new holding company, to be called Albaraka Banking Group, would have capital of $590 million. In future, its shares could be listed on the Bahrain stock market.

Dallah Albaraka, which is privately owned, is gathering all its banking interests into the Bahrain-based entity as part of a group-wide restructuring that began several years ago. Albaraka's numerous subsidiary banks currently report to the Albaraka Investment & Development Company in Jeddah. The changeover, which will mean a move to Bahrain for some staff in Jeddah, is expected to take most of this year. The group's non-bank financial interests will continue to be run from Jeddah for the moment (MEED 7:6:96).

'Albaraka has grown so much that we realised there was a need to consolidate,' says Saleh Malaikah, who heads Dallah Albaraka's financial services division. He says the group applied to the Bahrain Monetary Agency (BMA) for an offshore licence several years ago, but it took a long time to satisfy the central bank's stringent requirements. Dallah Albaraka, a diverse group of businesses created by Saudi businessman Saleh Kamel, has Islamic banking subsidiaries in Muslim and Western countries, as well as interests in the media, manufacturing and trade, shipping, farming and tourism.

Dallah Albaraka puts its total assets at around $7,000 million, of which about $4,000 million are held by its financial services division. These include shares in banks, insurance companies, leasing and investment firms. The group is selling half the shares in one of its holdings, Al-Amin Company for Securities & Investment Funds, in a $30 million private placement (MEED 19:12:97)

Bahrain is becoming a global centre for Islamic banking. Dallah Albaraka hopes that having its banking operations regulated by the BMA, which has a good reputation among central banks, will add to its international credibility. At the moment, each of its banking subsidiaries is licenced as a domestic or offshore bank in the country where it operates and is regulated by that country's central bank. This credibility is important because regulators often have reservations about Islamic banks in general. Dallah Albaraka itself, for example, does not have a banking licence in its home country, Saudi Arabia, and gave up its UK banking licence in 1993 after a disagreement with the Bank of England. It now operates in London through an investment company.

Apart from consolidation and credibility, there are other advantages to having a bank holding company in Bahrain, Malaikah says. If Dallah Albaraka wants to expand into banking in new markets, it can open an office of the holding company instead of having to create a stand-alone bank. It is also possible that the group could raise capital in future by listing the holding company's shares on the Bahrain stock market.