Financial Services Hub Rivalry: ADGM vs CBB/Bahrain Financial Harbour

The Gulf’s Oldest Financial Hub vs Its Most Ambitious

Bahrain was the Gulf’s financial centre before the term existed. In the 1970s and 1980s, when international banks needed a regional base for Middle Eastern operations, Bahrain offered what no other GCC state could: a functioning regulatory framework, an educated workforce, established telecommunications, and geographic centrality. Citibank, HSBC, Standard Chartered, and dozens of other international institutions established their Gulf headquarters in Manama.

Abu Dhabi Global Market did not exist until 2013. Established by Federal Decree as an international financial free zone on Al Maryah Island, ADGM adopted English common law as its legal framework — a deliberate differentiator in a region governed by civil law traditions. In the decade since its founding, ADGM has grown from zero to more than 1,800 registered entities and positioned itself as a direct competitor to not only Bahrain but also Dubai International Financial Centre.

The competition between these two financial ecosystems tells the story of Gulf finance in miniature: legacy versus capital, experience versus ambition, organic growth versus strategic construction.

The Numbers

Regulatory Philosophy

The two centres operate under fundamentally different regulatory philosophies. ADGM’s adoption of English common law creates a jurisdiction within Abu Dhabi where contracts, disputes, and corporate governance are adjudicated under the same legal principles that govern the City of London. The ADGM Courts, staffed by judges with common law experience, provide an independent judiciary separate from the UAE’s federal court system. For international financial institutions accustomed to common law frameworks, this eliminates legal uncertainty.

Bahrain’s Central Bank of Bahrain operates differently. Established in 2006 as the successor to the Bahrain Monetary Agency, the CBB is the GCC’s first single financial regulator — supervising banking, insurance, capital markets, and Islamic finance under one institutional roof. This consolidated model offers simplicity: one regulator, one licensing framework, one point of contact. The CBB regulates all financial services across the entire kingdom, not within a geographic free zone.

The contrast creates distinct value propositions. ADGM offers common law certainty and free zone advantages — zero corporate tax, 100 percent foreign ownership, unrestricted capital repatriation — within a physically defined jurisdiction. Bahrain offers a mature regulatory framework that applies economy-wide, with lower operating costs and a larger pool of established financial institutions.

Entity Counts and Scale

ADGM’s 1,800+ registered entities represent explosive growth from a standing start. The number includes asset managers, fintech firms, family offices, professional services firms, and holding companies. Not all are operational financial institutions in the traditional sense — many are special purpose vehicles, holding structures, or advisory firms that use ADGM’s legal framework for corporate governance.

Bahrain’s 350+ licensed financial institutions represent a more curated ecosystem. These are regulated entities — banks, insurance companies, investment firms, and capital markets participants — each subject to the CBB’s full supervisory framework. The number is smaller but the density of regulated financial activity per entity is higher.

Direct numerical comparison is therefore misleading. ADGM’s entity count includes a broader range of corporate structures. Bahrain’s licensed institution count reflects a narrower but deeper pool of regulated financial activity. The meaningful comparison is not how many entities each jurisdiction hosts but how much financial activity — assets under management, transaction volumes, capital intermediation — each generates.

Islamic Finance

Both jurisdictions position themselves as Islamic finance centres, but from different foundations. Bahrain is historically the intellectual home of Islamic finance standard-setting. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is headquartered in Manama. The International Islamic Financial Market (IIFM) operates from Bahrain. The kingdom’s Islamic banking sector holds substantial market share, and the CBB’s Islamic finance regulatory framework is among the most developed globally.

ADGM has moved aggressively to capture Islamic finance activity, adopting international standards and attracting Sharia-compliant asset managers and advisory firms. The free zone’s common law framework offers structural flexibility for Islamic financial products that require bespoke legal arrangements. But ADGM is building Islamic finance capability; Bahrain already possesses it.

Fintech and Innovation

Bahrain claimed first-mover advantage in Gulf fintech regulation. The CBB launched its regulatory sandbox in 2017 — the first in the GCC — allowing fintech firms to test innovative products under regulatory supervision with relaxed compliance requirements. FinTech Bay, located in Bahrain Financial Harbour, provides physical co-working and acceleration services. The kingdom has attracted participants from across the globe, including firms that might otherwise have established in Dubai or Abu Dhabi.

ADGM’s RegLab, launched in 2018, adopted a similar sandbox model but with the advantages of ADGM’s common law framework and Abu Dhabi’s deeper capital markets. The RegLab benefits from proximity to Hub71, Abu Dhabi’s technology ecosystem, and from the sovereign wealth capital available through Mubadala and ADQ venture programmes. A fintech firm in ADGM has access to a larger pool of potential institutional clients and a deeper well of venture capital than the same firm in Bahrain.

The Capital Advantage

This is where the competition becomes asymmetric. Abu Dhabi can subsidise ADGM’s growth. The government has invested heavily in Al Maryah Island’s infrastructure, offered attractive incentive packages for relocating firms, and leveraged sovereign wealth relationships to draw asset managers and advisory firms into the free zone. ADGM does not need to generate profit. It needs to achieve critical mass.

Bahrain’s financial centre must operate sustainably. The kingdom cannot afford to subsidise financial sector participants at Abu Dhabi’s scale. Bahrain Financial Harbour and Bahrain Bay required commercial real estate economics to function. The CBB’s regulatory fees and licensing costs must balance the cost of supervision. This financial discipline is both a constraint and a credibility signal — institutions that choose Bahrain do so on commercial merit, not incentive arbitrage.

Who Is Winning?

The answer depends on the metric. By entity count and growth rate, ADGM is winning decisively. By regulatory maturity and Islamic finance depth, Bahrain retains clear advantages. By asset management scale, the competition is tilting toward Abu Dhabi as sovereign wealth-adjacent capital flows into ADGM-domiciled vehicles. By fintech innovation, Bahrain’s first-mover advantage has been largely neutralised by ADGM’s deeper capital ecosystem.

The structural trajectory favours Abu Dhabi. ADGM can continue to grow by deploying capital and incentives that Bahrain cannot match. Bahrain’s path is to defend its regulatory reputation, deepen its Islamic finance leadership, and compete on cost and accessibility for mid-market financial firms that find Abu Dhabi’s premium positioning and Dubai’s scale excessive.

The Gulf financial services landscape will not converge on a single hub. But the balance of gravity is shifting. Bahrain built the original centre. Abu Dhabi is building the future one.