￼Amid a series of recent global economic recession instigated by factors such as credit crunches and debt crises that impacted many economies, the growth of the Islamic banking sector has been notably favourable, recording solid growth over the past decade.
Islamic banking emphasises Syariah-compliant products and a business model that follows principles of Islam as its core value base.
In Brunei, the Monetary Authority of Brunei Darussalam (AMBD) actively supports the growth of Islamic finance to uphold His Majesty Sultan Haji Hassanal Bolkiah Mu’izzaddin Waddaulah ibni Al- Marhum Sultan Haji Omar ‘Ali Saifuddien Sa’adul Khairi Waddien, Sultan and Yang Di-Pertuan of Brunei Darussalam’s aspirations for the country to become a premier Islamic financial hub in this region and beyond.
Islamic finance proved its resilience during the financial crisis and continues to be an attractive market segment. Last year, global Islamic financial assets more than doubled to US$1.8 trillion from 20 years ago, making Islamic finance a niche that Brunei can leverage on.
Encouraging levels of expansion rate and growing acceptance of Islamic finance is also attributed to the rapid economic development and increased prosperity and development of Islamic countries in the last few years.
The history of the Islamic banking industry in Brunei began with the establishment of Tabung Amanah Islam Brunei (TAIB) in 1991, followed by the Islamic Bank of Brunei Berhad in 1993 (IBB) and Islamic Development Bank of Brunei Berhad (IDBB) in 2000.
In 2005, His Majesty announced the merger of two local banks, the IBB and IDBB into Bank Islam Brunei Darussalam (BIBD), to strengthen its capabilities and competitiveness locally as well as internationally.
Islamic financial products play a central role in the local economy today, with Syariah-compliant banking products holding a 40 per cent market share. This is expected to grow rapidly in the next five years or so.
One study estimated that by the year 2020, the market share of Islamic banking and finance in the Sultanate will grow to at least 50 per cent of the total financial sector.
Islamic banking has been growing alongside the Takaful (Islamic insurance) industry with market shares of 47 per cent and 32 per cent respectively, as of the second quarter of 2014.
As the financial services industry remains extremely competitive, Islamic banks face formidable challenges from conventional banks. However, over the recent years, Islamic banks have grown in number and strength by consolidating retail banking with investment banking; forging vital links with local and foreign institutions; and providing optimally-designed financing facilities while simultaneously reducing their risk exposure.
Retail Islamic banking products and services currently available in the Brunei market include the BIBD Musharakah Mutanaqisah Home Financing Product and BIBD Financing Product using Tawarruq Concept.
Brunei has strengthened the Islamic banking industry’s operational base and regulatory framework with the introduction of legislation such as the Syariah Financial Supervisory Board Order 2006, the Islamic Banking Order 2008, and the 2008 Takaful Order.
Brunei’s central bank, AMBD has also positively impacted the development of Islamic finance in Brunei.
Brunei’s flagship Islamic Banking institution, Bank Islam Brunei Darussalam (BIBD), continues to expand its presence and promises to deliver world- class Islamic financial products and solutions.
The bank was named the Best Retail Bank in Brunei for the year 2016 by global research agency, The Asian Banker, retaining the prestigious accolade for a fourth consecutive year for increasing share in consumer finance despite a challenging market. “Despite the downward trend in overall profitability of the banking system, assets, and deposits in Brunei, BIBD still found room to grow, while maintaining a lower delinquency ratio compared to its peers. This resulted to double-digit growth in retail assets, and improvement in profit and revenue,” The Asian Banker said in a statement.
The statement also acknowledged BIBD’s ability to be the consumers’ bank of choice. Among all the banks in Brunei, BIBD has consistently ranked high in customer satisfaction surveys.
The bank has also retained its strong A- rating from leading international credit rating agency Standard & Poor’s (S&P), the highest for a Bruneian bank and on par with other notable banks in Asean.
The bank also announced record dividends in its 2015 annual report, registering a 28 per cent increase from the previous year’s dividend.
Mubashar Khokhar, Managing Director of BIBD, said the rating by S&P reflects BIBD’s strong capital assessment and profitability and reflects its business stability and leading market share in Brunei. It was also noted by S&P that BIBD’s liquidity ratios are stronger than that of several of its global peers.
He added that the S&P rating reaffirmation testifies BIBD customers’ and stakeholders’ firm support to the locally-owned Islamic financial institution as well as their employees’ relentless commitment in taking BIBD a step closer towards achieving its goal of becoming the first choice bank for its customers, stakeholders and employees.
“We remain committed to continue our attention to our financial viability and strength, while focusing on advancing our product range through innovation, technology and customer service. Ultimately, this enables us to continue providing safe and responsible financial products and services to all our customers,” said Mubashar.
BIBD was also named the strongest bank in Brunei by The Asian Banker, and one of the strongest in Asia-Pacific on par with top international banks from Hong Kong, Malaysia and China.
Among an annual Top 1000 World Banks rankings issued by The Banker magazine, BIBD was ranked at 38th in terms of soundness of its capital assets ratio, improving on its previous ranking of 42nd. According to The Banker, the high capital/assets ratio ranking reflects a healthy business model and good financial strength. At the same time, BIBD remains the only Bruneian bank to represent the nation within the annual listing of world’s top banks.
In another listing of the strongest banks by balance sheet, BIBD was once again the only Bruneian bank featured in the ranks of the Asia-Pacific’s top 500 financial institutions, holding the 14th spot for 2016.
BIBD set another milestone in 2015 when it established its first international office in Singapore, which has been a part of BIBD’s growth strategy to expand its local and overseas presence.
In its bid to establish a more vibrant Islamic banking industry in the country and in realising Brunei’s aspiration to become a global Islamic finance hub, Perbadanan TAIB is planning to create a Syariah- compliant banking subsidiary.
Perbadanan TAIB’s landmark announcement came in December 2016, following the signing of key documents with the Islamic Corporation for the Development of the Private Sector (ICD) for the establishment of an Islamic bank in the country. TAIB has an illustrious history and is a corporate body established in Brunei under the Perbadanan Tabung Amanah Islam Brunei Act (Cap 163).
The financial institution was launched in 1991 by His Majesty Sultan Haji Hassanal Bolkiah Mu’izzaddin Waddaullah ibni Al-Marhum Sultan Haji Omar ‘Ali Saifuddien Sa’adul Khairi Waddien, the Sultan and Yang Di-Pertuan of Negara Brunei Darussalam. On September 29, 2016, TAIB celebrated its silver jubilee.
Perbadanan TAIB has two wholly-owned subsidiaries – Insurans Islam TAIB Holdings Sendirian Berhad (for
takaful services) and Darussalam Holdings Sendirian Berhad (for Haj and Umrah services).
Throughout the 25 years of its operation, Perbadanan TAIB has continued to improve its customer services and expanded to eight branches all over Brunei Darussalam.
The local Financial Institution, which conducts all its activities in accordance with Islamic principles, has also deployed its resources to embrace the digital era. It has a dedicated Call Centre which operates as a centralised channel to attend to and resolve customer queries effectively.
Alternative channels for customers to perform banking transactions have also been developed by Perbadanan TAIB, such as mobile apps and Internet banking for the benefit of customers.
To capitalise on the rapid globalisation of the Islamic finance environment, Perbadanan TAIB aspires to bring its operations to the next level by providing more sophisticated banking products and services such as trade finance and working capital provision for the corporate sector, especially to support Small Medium Enterprises (SME) startups.
In its Silver Jubilee year, as an initiative to support the Government’s vision in supporting SMEs towards realising the Vision 2035, TAIB came up with the Entrepreneur Programme, in collaboration with Darussalam Enterprise (DARe). This programme allows individuals or companies to pitch their ideas, establish new start-ups or for business expansion plans.
Perbadanan TAIB’s vision for the Entrepreneur Programme is to be able to support local start-ups by enhancing their business management knowledge and skills and providing a networking platform where they can share business ideas.
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