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Brunei Darussalam experiencing strong Islamic banking

Published on 17th Feb, Edition 7, 2014


Country still needs Shariah experts for growth of Islamic banking market

Brunei Darussalam has only one fully-developed Islamic bank. Islamic windows are playing a pivotal role to invigorate the Islamic banking industry resembling with full-developed Islamic banks in most parts of the world and most of all, they are doing fine job to bring customers from conventional banking to Shariah-compliant business.

The Tabung Amanah Islam Brunei was the first financial institution to offer savings and financing in accordance with Islamic principles when it was launched in 1991. It was followed two years later by the opening of Islamic Bank of Brunei. They were joined in 2000 with one name Islamic Development Bank of Brunei.

Sukuk has not made much progress in Brunei Islamic banking. The first Sukuk Ijarah was initiated by the Islamic Development Bank of Brunei (now merged into BIBD) and BLNG in 2006. Afterward a short-term money market Sukuk Ijarah Program was issued by the Government of Brunei Darussalam.
Currently Brunei Darussalam’s is well set to establish its Islamic banking services in every hook and corner of the country. The rising demand from its public has led to the launch of new banks and bond issuances. Standard Chartered Bank is planning to introduce Islamic banking products to meet increased demand for Shariah compliant banking services in Brunei.

The market share held by Shariah-compliant banking is expected to increase through aggressive marketing efforts and strong government support of 60 percent from its present levels of 40 to 55 percent over the next five years.

Brunei Darussalam is enjoying from instant participation in the Islamic banking division, having launched its first Islamic bond, the Short Term Government Sukuk Al-Ijarah program worth $150 million for a three-month certificate in April 2006.

The Sultanate having vastly improved its operational base and regulatory framework and is now taking frantic steps to handle a shortage of trained industry professionals in the Islamic financial sector by providing on-the-job training while local universities offering bachelors, masters and doctorate degree programs related to Islamic finance.

Renowned Islamic banking economists and experts are of the firm opinions that the sector should now concentrate into exporting the expertise and coordinating a global role in Shariah-compliant banking.
Brunei Islamic banking services can be fruitfully utilized by Muslim and non-Muslims alike to benefit from the many advantages of Islamic finance. An example for this is the flourishing Islamic finance market in South Africa, where the Muslim population is less than two percent, but the country takes credit of establishing five Islamic banks, 13 Islamic funds and two takaful companies, which are mostly popular among Muslims and non-Muslims communities because of their services.

In this context, Brunei could reach out to the neighboring Philippines Muslim community, which, after all, counts for seven percent of the country’s 100 million population. There are lots of opportunities for the advancement of Islamic finance in the Philippines, particularly in long-term financing through Sukuk. Brunei Darussalam is striving hard to develop a strong Islamic financial sector not only domestically but also to serve the regional and global markets amid fine lookout for the world economy.


In the Asian region, after not a satisfactory economic performance, the economic growth is anticipated to expand steadily and to remain as an important engine of growth of world economy. On the whole, Asia is expected to grow around 6 percent this year largely as a result of recovering international demand and of continued firm domestic demand. Also closer to home, Asean economies are anticipated to remain strong with six percent average growth this year.

Brunei aspires to develop a strong Islamic financial sector not only domestically but also to serve the regional and global markets. It has been experiencing strong growth but penetration of more Islamic financial services will add more to the development of Islamic banking in Brunei.

Economists and experts are of the opinion that though Brunei has made substantial progress towards developing itself as a strong Islamic finance centre, but still there are a number of fundamental areas Brunei needs to flourish and improve upon to accomplish its goals.

One of the top priority requirements for Brunei Darussalam is to produce more Shariah experts, according to Mohamad Akram Laldin; the executive director of the Malaysia-based International Shariah Research Academy for Islamic Finance. A major challenge for the Islamic banking industry in Brunei is to amalgamate knowledge of Shariah and of the market. There is need to have more Shariah graduates go into the area and understand the market. There is need for people who are able to run the business, who are capable, and can plan. With the establishment of the Centre for Islamic Banking, Finance and Management (CIBFM), Brunei Darussalam has taken a step in the right direction. More and more people who are trained in Islamic finance are coming up.

Brunei Darussalam’s leading educational facilities will also seek to support the government’s policy of developing the Sultanate as a centre of Islamic financial excellence. The CIBFM, which is established by the Ministry of Finance to address fundamental challenges in Islamic financial practice and to assist in the development of human resources for the sector.

There are also other financial institutions working to heighten the pool of qualified personnel in Brunei Darussalam. According to other development that Islamic banks would encourage Islamic finances educational stocks. Bank Islam Brunei Darussalam (BIBD) would be sponsoring a chair of Islamic banking and finance, leadership and entrepreneurship at the FBEPS. Brunei will soon have the large fruits of investment in Islamic banking. It has invested a large sum of money on human resources training engaged in Islamic banking industry. It may be specifically mentioned that the Islamic banking in Brunei is already profiting from several years of experience and a generation of professionals that have grown up inside the industry, have grown up inside the Islamic banking industry also.


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