A new law that makes it easier and less expensive for small businesses to obtain credit has been drafted by the government.

Industry and Commerce Minister Abdulla bin Adel Fakhro said the proposed law which is yet to be put before parliament governs the creation and enforcement of security interests in movable assets.

Addressing a luncheon meeting organised by the Rotary Club of Manama at the Gulf Hotel Bahrain Convention and Spa yesterday, Mr Fakhro said the law will allow businesses to use any of their assets as collateral against a loan.

“For example if you have accounts receivable in the market, you can use it as a guarantee to get short term financing,” he explained.

According to experts accounts receivable (AR) is the money owed to a business by its customers for goods or services that have been delivered but not yet paid for. It is an asset that is recorded on the balance sheet and is considered to be a current asset, meaning that it is expected to be converted into cash within one year.

It is created when a business sells goods or services on credit. The business then sends an invoice to the customer, which states the amount owed and the due date. The customer is expected to pay the invoice by the due date, but this may not always happen.

Responding to a question from a business-onwer the minister said the law would apply to all security interests in movable assets, including inventory, equipment, accounts receivable, and investment property.

However, it would not apply to security interests in real estate or intellectual property.

Mr Fakhro said the government was also working on a credit ratings system for businesses in partnership with the Bahrain Chamber and Benefit, the national payments switch and electronic financial transactions network.

The system that assesses the creditworthiness of businesses was aimed at enabling lenders to determine the risk of lending money to a business and to set the interest rate on the loan.

According to the minister such a system would go a long way in addressing the difficulty faced by local small and medium-sized enterprises (SMEs) in getting credit.

“As many as 93 per cent of businesses in Bahrain are SMEs and they account for 70,000 commercial registrations and employ over 70pc of the private sector workforce.”

Mr Fakhro also said the Industry and Commerce Ministry would launch an upgraded version of the Sijilat digital platform that streamlines business registration and licensing in Bahrain, by end of next year.

Sijilat 4.0 would use AI and other advanced technologies and incorporate online chat support, wider electronic payments and greater integration with other government systems, to improve the 3.0 version launched in August, he said.

The system is a one-stop shop for businesses to start, manage, and grow their operations in the country.

avinash@gdnmedia.bh

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