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Legal Update: Buy Now, Pay Later – Financial Services

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The Central Bank of Bahrain (the “CBB”)
issued amendments to the CBB Rulebook Volume 5 (Type 3: Financing
Companies) on 8 February 2022, to mainly incorporate innovative
business models for financing consumer products within its scope as
part of short-term financing activities in an effort to keep pace
with industry evolution and consumer demands for financial

A new form of company will be permitted to enter the market of
online retail platforms in the form of “Buy Now, Pay
Later” (“BNPL”) companies. BNPL
is a form of short-term lending which permits consumers to make
purchases and pay for them later, typically without an additional
interest rate.

Several changes will arise within this category of short-term
financing companies:

  • A reduction in the restrictions of ownership percentages of

  • Appropriate management structures to support technology-based
    business models;

  • A capital that is determined by the nature, scale, and
    magnitude of activity. Entities intending to make use of the BNPL
    scheme are not required to have a minimum capital of BHD 5,000,000
    , as is the case with conventional finance businesses.

BNPL agreements, are becoming a more popular payment
alternative, particularly when shopping online. These changes are
part of a recent series of changes made by the CBB to the CBB
Regulatory Framework in order to keep up with market advancement,
particularly in the field of financial technology (Fintech).
Moreover, the introduction of additional forms of companies into
the CBB Rulebook allow for increased market options for the
consumer, bringing variety of choice within a free-market.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

POPULAR ARTICLES ON: Finance and Banking from Bahrain

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