ASIA NEWS NETWORK
WE KNOW ASIA BETTER
Brunei's syariah-compliant banking market to grow bigger
Publication Date : 10-04-2012
Syariah-compliant banking in Brunei is seen to reach between 55 to 60 per cent from the current 40 per cent market share in the next five years, said the managing director of a local bank.
The forecast, coupled with a more central role that Islamic finance is now playing in the Bruneian economy, emphasises the need for standardised regulations for Islamic finance, said Javed Ahmad, the Managing director of Bank Islam Brunei Darussalam (BIBD).
Javed, speaking during the opening of UBD's seminar on Islamic finance, "20 Years of Islamic Finance in Brunei Darussalam: Challenges and Opportunities", said Brunei has a big potential to be an Islamic financial hub due to its strong economic and political stability, good infrastructure and support of the government.
"Having strengthened its operational base and regulatory framework, Brunei is now taking steps to address shortage of trained industry professionals in the Islamic financial sector by providing on-the-job training and local universities offering bachelors, masters and doctorate degree programmes related to Islamic finance."
The managing director expressed belief that with more aggressive marketing, Brunei's journey towards becoming an Islamic financial hub may be a possibility in the next few years.
Speaking on the challenges ahead, he said although Islamic finance is growing rapidly, it still represents a small portion of the global finance market and that Islamic scholars are not in complete agreement regarding what constitutes syariah-compliant financing.
"Different interpretations of the rules caused major communication and brand identity challenges. Hence, standardisation of Islamic finance regulations has been of increasing interest in the industry," he said.
On that note, Javed said that this seminar could not have been held in a more appropriate and timely manner to step up efforts in developing a stronger Islamic financial sector in Brunei.
"I am pleased to know that this seminar will focus on highly relevant key topics as well as a half-day panel discussion with the key industry players of Islamic Finance in the country," he said.
The government has been pushing for the development of the Islamic finance sector with the introduction of new laws such as the Syariah Financial Supervisory Board (SFSB) Order 2006, the Islamic banking Order 2008, and the 2008 Takaful Order.
On Jan. 1, 2011, the Monetary Authority of Brunei Darussalam (AMBD), a statutory body that acts as the central bank of Brunei, was formally established with the task of formulating and implementing monetary policy to supervise financial institutions and currency managements.
"Undoubtedly such tasks will become increasingly important to the development of Islamic finance in Brunei," said Javed.
He went on to say that the number of Islamic financial institutions worldwide has risen to over 300 at present in more than 75 countries.
"While the conventional financial system is recovering from the global financial crisis, Islamic finance have appeared to be more resilient and is growing rapidly," he said.
Today, Islamic finance boasts global assets in excess of US$1 trillion and is expected to grow at an annual rate of 10 to 20 per cent.
Javed said that Islamic banks began their journey in the 1970's in which they were typically commercial banks operating on an interest-free basis and, at a time when the Islamic doctrine banking matters were being developed.
"While Islamic banks served its purpose, the markets began to look for alternative solutions for fund-raising and insurance through Islamic finance as it concerns the provisions of financial services or products which are compatible with the principles of Islam and Shariah. Today, Islamic finance is no longer limited to the provision of interest-free bank accounts but includes a whole spectrum of solutions and has flourished throughout the Middle East, Europe and Asia," he said.
Brunei's history with Islamic finance started with the establishment of Tabung Amanah Islam Brunei (TAIB) in 1991 followed by the Islamic Bank of Brunei (IBB) in 1993 and Islamic Development Bank of Brunei (IDBB) in 2000.
On July 15, 2005, an announcement was made by the Ministry of Finance that His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam has consented for the proposed merger of the Islamic Bank of Brunei Berhad (IBB) and the Islamic Development Bank of Brunei Berhad (IDBB) into what is known as Bank Islam Brunei Darussalam or BIBD today.