AN urgent proposal to defer all bank loan instalments until June next year for Bahrainis has been approved unanimously by MPs.
The proposal by five MPs led by Bahrainisation Committee chairman Ebrahim Al Nefaei has been urgently referred to the Cabinet.
The current loan deferral option expires on December 31.
The Central Bank of Bahrain (CBB) has also been urged to encourage the government to back the proposal.
Mr Al Nefaei said the aim was to allow people, businesses and the economy to properly recover from the effects of the Covid-19 pandemic which are still being felt despite positive indicators.
“Deferrals have helped the market and the moment it is stopped, people will sit at home and limit their spending,” he said.
“We don’t want the economy to return back to March 2020; the Cabinet needs to take a decision on Monday with it being their last session of the year.”
The Bahrain Chamber has backed the move, from January to June next year, to ensure businesses continue to recover.
Loans were deferred from March until August last year without bank charges.
They were deferred three more times under optional deals in which interest was calculated from August last year until December this year.
Isa Al Qadi, one of the MPs backing the proposal, said world markets were already stagnant in 2019 before the pandemic made things worse last year.
“Loan deferrals were introduced to allow cash flow in the market at a time of uncertainty and drop in business.
“This helped small and medium businesses but several unfortunately reached a break point after being closed for months without real income like salons, massage parlours, and retail and entertainment outlets amongst many others.
“They owed huge amounts of money and some were even referred to the Public Prosecution; loan deferrals helped them reach settlements.”
However, Mohammed Buhamood, another MP supporting the proposal, voiced concerns about mounting interest.
“The interest has been accumulating since last year and the fear is that it could lead to a future financial crisis in which people can’t pay dues when loans have to be paid back.
“In my opinion, deferrals should continue but banks have to show flexibility in the interest they charge.”
mohammed@gdn.com.bh
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