Brunei: Much catching up to do in Islamic banking
Brunei has still to fully develop its Islamic finance sector. There are great opportunities for foreign Islamic banking institutions to forge ties with the Brunei government in pushing the business.
New ventures are welcome to develop innovative Islamic banking products to give the market a boost.
In fact, despite a large Muslim majority, Brunei did not see much development in the area of Islamic finance until 2006 when the Ministry of Finance launched the Banking Order and Insurance Order, established the Brunei International Financial Center, launched its first sukuk and introduced the Shariah Financial Supervisory Board on a national level, which was followed by the Islamic Banking Order in 2008.
Since 2006, the overall value of issued sukuks totalled to around $4 billion with the latest transaction being Brunei Gas Carriers $183.6 million Islamic finance facility to fund the acquisition of an LNG vessel compared to Malaysia’s more than $40 billion in the same period.
Banking analysts in Brunei said that more action was needed in the country for the creation of attractive Islamic products and services such as equity funds, wealth management and murabahah to catch up with other industry players in the region.
Developing the Islamic finance industry would support Brunei’s efforts to further diversify its economy away from oil and gas income. A recently published report by Inside Investor, Islamic Finance Report 2013, which was sponsored by Qatar’s Barwa Bank, shows that the Islamic finance industry today is worth an estimated $1 trillion, representing the rapid growth it has already undergone in the past five years.
Though contributing only a fraction of the world’s total banking assets, Islamic financial products’ resilience to global crises has given the industry credibility in its use as an alternative to conventional banking.
Brunei’s strengths, led by strong economic and political stability, good infrastructure and government support, mean it is well placed to build a reputation as an Islamic financial center.
Javed Ahmad , the managing director of the country’s largest Shariah banking institution, Bank Islam Brunei Darussalam, said the market share held by Islamic finance could increase to 60 per cent from its current levels of 40-55 per cent over the next five years with more aggressive marketing, better supply of skilled Islamic banking experts and by developing new Islamic banking products to strengthen Brunei’s position in the market.
Collaboration with neighbouring Malaysia is another important step. As Inside Investor’s report shows, today Malaysia is home to the world’s largest Islamic private-debts securities market registered at $35 billion, making Kuala Lumpur the world’s largest Islamic financial hub.
To further strengthen this position, the country has set up ambitious development plans for the sector, which include becoming an intellectual and capital center for the entire industry.
With Brunei positioning itself as a specialty player in this industry, it could easily complement and, at the same time, grow with Malaysia.
This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.
[caption id="attachment_7466" align="alignleft" width="146"] By Arno Maierbrugger[/caption] Brunei has still to fully develop its Islamic finance sector. There are great opportunities for foreign Islamic banking institutions to forge ties with the Brunei government in pushing the business. New ventures are welcome to develop innovative Islamic banking products to give the market a boost. In fact, despite a large Muslim majority, Brunei did not see much development in the area of Islamic finance until 2006 when the Ministry of Finance launched the Banking Order and Insurance Order, established the Brunei International Financial Center, launched its first sukuk and introduced the Shariah...
Brunei has still to fully develop its Islamic finance sector. There are great opportunities for foreign Islamic banking institutions to forge ties with the Brunei government in pushing the business.
New ventures are welcome to develop innovative Islamic banking products to give the market a boost.
In fact, despite a large Muslim majority, Brunei did not see much development in the area of Islamic finance until 2006 when the Ministry of Finance launched the Banking Order and Insurance Order, established the Brunei International Financial Center, launched its first sukuk and introduced the Shariah Financial Supervisory Board on a national level, which was followed by the Islamic Banking Order in 2008.
Since 2006, the overall value of issued sukuks totalled to around $4 billion with the latest transaction being Brunei Gas Carriers $183.6 million Islamic finance facility to fund the acquisition of an LNG vessel compared to Malaysia’s more than $40 billion in the same period.
Banking analysts in Brunei said that more action was needed in the country for the creation of attractive Islamic products and services such as equity funds, wealth management and murabahah to catch up with other industry players in the region.
Developing the Islamic finance industry would support Brunei’s efforts to further diversify its economy away from oil and gas income. A recently published report by Inside Investor, Islamic Finance Report 2013, which was sponsored by Qatar’s Barwa Bank, shows that the Islamic finance industry today is worth an estimated $1 trillion, representing the rapid growth it has already undergone in the past five years.
Though contributing only a fraction of the world’s total banking assets, Islamic financial products’ resilience to global crises has given the industry credibility in its use as an alternative to conventional banking.
Brunei’s strengths, led by strong economic and political stability, good infrastructure and government support, mean it is well placed to build a reputation as an Islamic financial center.
Javed Ahmad , the managing director of the country’s largest Shariah banking institution, Bank Islam Brunei Darussalam, said the market share held by Islamic finance could increase to 60 per cent from its current levels of 40-55 per cent over the next five years with more aggressive marketing, better supply of skilled Islamic banking experts and by developing new Islamic banking products to strengthen Brunei’s position in the market.
Collaboration with neighbouring Malaysia is another important step. As Inside Investor’s report shows, today Malaysia is home to the world’s largest Islamic private-debts securities market registered at $35 billion, making Kuala Lumpur the world’s largest Islamic financial hub.
To further strengthen this position, the country has set up ambitious development plans for the sector, which include becoming an intellectual and capital center for the entire industry.
With Brunei positioning itself as a specialty player in this industry, it could easily complement and, at the same time, grow with Malaysia.
This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.
