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 services.

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 Controllers;

  • 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.

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