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A proposed law allowing associations and non-governmental organisations (NGOs) to invest their surplus funds domestically in safe financial instruments was unanimously approved by the Shura Council yesterday.
The bill, amending the 1989 Social, Cultural, Sports and Youths Clubs, Organisations and Societies Law, allows NGOs to invest funds exceeding their immediate operational needs, provided the investments are made in Bahrain and are confined to low-risk financial products.
The bill will now be forwarded to Parliament Speaker who will refer it to the Prime Minister.
Shura Council services committee chairwoman Dr Jameela Al Salman emphasised that the volume of surplus funds held by associations is not deemed large enough to pose significant risks.
“Our role is to ensure that the law enables civil society to thrive without exposing them to undue risk,” she said.
“Clear oversight, transparency and regulatory co-ordination will be key pillars of implementation.”
In her presentation during the session, Dr Al Salman noted that similar systems exist in other GCC countries, the UK and the US.
“This law aims to support local associations and enhance their financial efficiency by allowing them to invest surplus funds safely,” she said.
“Around 668 associations, most under the Social Development Ministry, will be covered by this law. It sets out numerous legal safeguards to open the door for investment while defining safe investment fields and guaranteeing prudent institutional oversight.
“The law will help associations achieve the objectives for which they were established, while also stimulating Bahrain’s economy and ensuring oversight of these operations.”
She added that during meetings with government agencies, members learnt the government has ideas for issuing decisions to support optimal implementation.
“Current decisions already ensure regulatory powers are in place. An additional clause was introduced under the penalties section, which we support because it reinforces legislative precision and aligns with the principle of legal certainty.”
Committee rapporteur Hala Ramzi Fayez explained that the legislation seeks to rectify the current absolute ban on NGOs engaging in financial speculation.
“The amendment strikes a balance by prohibiting high-risk speculative activities while allowing low-risk, guaranteed-return investments,” she said.
“This will generate reliable returns to support associations’ budgets and their efforts to achieve their goals.”
She added that the law ensures sound management of association funds, protecting their assets from financial risk and misuse through strict regulations and detailed provisions governing investment decisions.
“These principles include prohibiting speculative investments, limiting investments to surplus funds, restricting investments to the domestic market and requiring that all investments be safe and low-risk,” Ms Fayez noted.
“Enabling associations to invest their funds legally and safely is a fundamental pillar of sustainability and independence.
“The law achieves an ideal balance between financial sustainability for associations and stimulating the national economy.”
Shura’s legislative and legal affairs committee chairwoman Dalal Al Zayed stressed the importance of issuing regulatory decisions to clearly define what constitutes unsafe or high-risk speculation.
“Associations must fully understand these definitions,” she warned.
“We need a balance between safeguards and flexibility because violations could entail criminal liability. We must also prepare associations by clarifying the types of speculative activities involved.”
Shura’s first vice-chairman Jamal Fakhro recounted that the original legislative proposal aimed to clarify the term ‘financial speculation’, which had been interpreted so broadly that even depositing funds in a US dollar account at a Bahraini bank was considered speculative.
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Mr Fakhro
“The ministry even directed some associations to sell off all their investments,” he recalled.
“While the amendment is crucial and the addition acceptable, the real test lies in the details. There is a risk that excessive restrictions could once again obstruct associations from investing their limited surplus funds.”
Mr Fakhro also warned that if the ministry approves an investment that later proves unsafe, accountability concerns could arise.
“This could place the ministry in a difficult position,” he said.
Member Abdulla Al Nuaimi underscored the need for flexibility to seize investment opportunities. He raised concerns about the Social Development Ministry’s administrative capacity, noting that it plans to co-ordinate with other authorities to set implementation mechanisms and conditions.
“To ensure the safety of investments, I believe the National Audit Office should be tasked with monitoring all procedures,” Ms Al Nuaimi proposed.
The Shura Council’s financial and economic affairs committee endorsed the legislation, highlighting its potential to enhance the financial efficiency of associations while contributing liquidity to Bahrain’s local market.
“The bill is structured to restrict investments to the local market and to safe instruments such as government development bonds,” explained committee chairman Khalid Al Maskati in writing.
“This ensures the dual benefit of supporting national economic growth and enabling associations to better meet their objectives.”
However, Mr Al Maskati noted that it remains difficult to gauge the full economic impact due to the absence of comprehensive data on the amount of surplus funds held by associations. He stressed that risk assessments would fall under the purview of the implementing authority, recommending that the services committee seek further clarification from relevant regulatory bodies. The legislation, he added, is not expected to have any direct fiscal impact on the state budget.
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