Banking in Brunei – Insights from a highly competitive market

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Inside Investor sat down with Javed Ahmad, Managing Director of Bank Islam Brunei Darussalam to discuss the role of BIBD as the largest Islamic Bank in Brunei. Javed Ahmad shares BIBD’s ambition of having an overseas presence in the next three years.

Q: Can you elaborate on the competitive environment of the Islamic financial sector in Brunei?

A: The overall banking sector in Brunei is very competitive. We have a population of 400,000 people and nine banks, and these banks have over 40 branches, which means there is a branch for every 10,000 people in Brunei. This is great for consumers as they have a lot of choice and get high quality service at competitive rates.

Q: 65 per cent of your customers are retail consumers, is that correct?

A: We have three businesses: consumer banking, corporate banking and institutional banking. In terms of overall revenue we have a good mix, but it is consumer banking that contributes slightly more than half of our income. However, corporate and institutional businesses have grown over the past few years.

Q: You have 6,000 individual shareholders, does this have any influence on your business?

A: Many of the 6,000 shareholders are also our customers. What we do as the nation’s homegrown institution for our shareholders is to make sure that we manage our balance sheet, that we protect our customer deposits, but also promote financing to businesses. We also provide financing and if there are good business opportunities, we will be present.

Q: What about the need for better risk management practices within the Islamic banking sector?

A: That is very important, and actually that is why we hired an experienced risk manager. Risk management is a key focus within our bank, and we have very disciplined risk management parameters. We also have an independent credit committee. Together with risk management we have single customer limits, and we have very conservative provisioning requirements. We have probably the most developed risk management framework in the country as we invest domestically and internationally.

Q: In corporate financing, do you asses risks in lending to companies based on their Islamic practices?

A: Our business is financing, and we actually finance new companies if there are the right opportunities. Generally, in the oil and gas services sector in Brunei there are no compliance issues. We also finance the construction sector, and if we become a shareholder in a particular business, the company cannot have conventional debt and all its businesses must comply with Islamic principles. We have to make sure that the business of the company is not in conflict with Shariah principles.

Q: With which institutions are you cooperating in ASEAN or elsewhere?

A: We work with institutions on an international basis, but our key strength is to cooperate with banks in Brunei. The Brunei dollar is linked to the Singapore dollar, so we actually play an active role in the Singapore interbank market. We also work with banks in the GCC in countries such as Qatar, Abu Dhabi and Saudi Arabia. These are the main financial institutions we look at from Brunei. In Europe, we look mainly at the strong financial institutions in Germany, the UK, France and Switzerland. When it comes to ASEAN it has to fit strategically – for example, banks from Vietnam or Myanmar are not our focus as of now, but in the future they might.

Q: How many customers do you have in Brunei?

A: Over 100,000, which means 1 of every 4 Bruneians is a customer.

Q: How is your online banking system functioning?

A: We currently have the most comprehensive mobile banking service in Brunei, and our Internet banking system has been running for two years. After months of testing, we have just launched our electronic money service, “eTunai”, which allows cashless payments via mobile devices. All these resources are new to Brunei, and hopefully through our advancements we will be ahead of our competitors.

Q: Where do you see BIBD three years from now?

A: In three years, BIBD will continue to be a successful bank in Brunei, one which is strong not only in the consumer and corporate segments  but also the treasury and institutional banking businesses. We want our home market to be well fortified and maintain our robust balance sheet. In three years time I do hope that we are present in an overseas market as well.

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Reading Time: 3 minutes

Reading Time: 3 minutes

Inside Investor sat down with Javed Ahmad, Managing Director of Bank Islam Brunei Darussalam to discuss the role of BIBD as the largest Islamic Bank in Brunei. Javed Ahmad shares BIBD’s ambition of having an overseas presence in the next three years.

Q: Can you elaborate on the competitive environment of the Islamic financial sector in Brunei?

A: The overall banking sector in Brunei is very competitive. We have a population of 400,000 people and nine banks, and these banks have over 40 branches, which means there is a branch for every 10,000 people in Brunei. This is great for consumers as they have a lot of choice and get high quality service at competitive rates.

Q: 65 per cent of your customers are retail consumers, is that correct?

A: We have three businesses: consumer banking, corporate banking and institutional banking. In terms of overall revenue we have a good mix, but it is consumer banking that contributes slightly more than half of our income. However, corporate and institutional businesses have grown over the past few years.

Q: You have 6,000 individual shareholders, does this have any influence on your business?

A: Many of the 6,000 shareholders are also our customers. What we do as the nation’s homegrown institution for our shareholders is to make sure that we manage our balance sheet, that we protect our customer deposits, but also promote financing to businesses. We also provide financing and if there are good business opportunities, we will be present.

Q: What about the need for better risk management practices within the Islamic banking sector?

A: That is very important, and actually that is why we hired an experienced risk manager. Risk management is a key focus within our bank, and we have very disciplined risk management parameters. We also have an independent credit committee. Together with risk management we have single customer limits, and we have very conservative provisioning requirements. We have probably the most developed risk management framework in the country as we invest domestically and internationally.

Q: In corporate financing, do you asses risks in lending to companies based on their Islamic practices?

A: Our business is financing, and we actually finance new companies if there are the right opportunities. Generally, in the oil and gas services sector in Brunei there are no compliance issues. We also finance the construction sector, and if we become a shareholder in a particular business, the company cannot have conventional debt and all its businesses must comply with Islamic principles. We have to make sure that the business of the company is not in conflict with Shariah principles.

Q: With which institutions are you cooperating in ASEAN or elsewhere?

A: We work with institutions on an international basis, but our key strength is to cooperate with banks in Brunei. The Brunei dollar is linked to the Singapore dollar, so we actually play an active role in the Singapore interbank market. We also work with banks in the GCC in countries such as Qatar, Abu Dhabi and Saudi Arabia. These are the main financial institutions we look at from Brunei. In Europe, we look mainly at the strong financial institutions in Germany, the UK, France and Switzerland. When it comes to ASEAN it has to fit strategically – for example, banks from Vietnam or Myanmar are not our focus as of now, but in the future they might.

Q: How many customers do you have in Brunei?

A: Over 100,000, which means 1 of every 4 Bruneians is a customer.

Q: How is your online banking system functioning?

A: We currently have the most comprehensive mobile banking service in Brunei, and our Internet banking system has been running for two years. After months of testing, we have just launched our electronic money service, “eTunai”, which allows cashless payments via mobile devices. All these resources are new to Brunei, and hopefully through our advancements we will be ahead of our competitors.

Q: Where do you see BIBD three years from now?

A: In three years, BIBD will continue to be a successful bank in Brunei, one which is strong not only in the consumer and corporate segments  but also the treasury and institutional banking businesses. We want our home market to be well fortified and maintain our robust balance sheet. In three years time I do hope that we are present in an overseas market as well.

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