COVID-19 Impacts Research Paper: Loan Deferrals Decision was Reassuring to Bahraini Families
Date: 24th May 2021
Based on the Derasat-UNDP partnership to study the socioeconomic impact of Covid-19 in Bahrain, Derasat published a paper titled: “An Assessment on the Impacts of Loan Deferrals in Bahrain”, by Sara Bahman and Omar Al-Ubaydli. The study analyzes the Central Bank of Bahrain’s first two decisions to defer loan repayments for Bahrainis, in March 2020 and in September 2020, based on interviews with over 100 Bahraini households.
The research paper concluded that loan deferrals, especially the March 2020 deferral, helped Bahraini families overcome the financial challenges posed by Covid-19, including decreased income and increased expenditure: a reassurance factor among them.
The paper affirmed that – had the deferrals not been approved – many Bahraini households would have had to use a combination of decreased expenditure and running down savings to manage their finances. A small percentage would have seriously considered defaulting on their loans were it not for the deferrals.
According to the paper, the most important factor in determining a household’s support for and benefit from the deferrals was its financial strength, as measured by its income and the percentage of monthly income allocated to loan servicing. Households with low income and high servicing payments were particularly relieved to hear about the deferrals and benefitted greatly from them.
The survey was conducted in November 2020, before the expiration of the second loan deferral, and the participants indicated considerable support for the prospect of a third deferral, which the CBB eventually implemented in January 2021.