Islamic banking was first introduced in Brunei Darussalam in the early 1990s. Since then, it has played a significant role in the country’s banking industry.
The Brunei Darussalam Financial Sector Blueprint 2016-2025 (FSBP), published by Autoriti Monetari Brunei Darussalam (AMBD) in 2016, identifies core areas where the financial services sector – particularly in terms of Islamic finance – can contribute to the country’s growth.
A key focus of financial sector development is the strengthening of Brunei as an international Islamic financial hub. According to the blueprint, Brunei has recorded an increasing level of foreign participation in domestic Islamic financial markets, particularly in the Sukuk and Takaful market.
Furthermore, initiatives will be put in place to accelerate the internationalisation of Islamic finance, establishing a more significant role for the financial system in the intermediation of international financial flows.
In order to achieve this goal, more innovative Syariah-compliant financial products and services will be introduced, meeting the more diverse global demands for Syariah-compliant financial solutions.
For more information about Islamic finance in Brunei, visit the Brunei Darussalam Islamic Finance (BDIF) website at bdif.com.bn. The website aims to provide insights into the Islamic finance industry and other unique Islamic economy opportunities across different sectors in Brunei.
According to the BDIF website, Brunei’s Islamic financial ecosystem is made up of Islamic banks, Takaful operators, Islamic investment dealers, Sukuk and other ancillary services. Islamic financial assets account for more than 50 per cent of the total market share, and efforts are underway to deepen the Islamic financial market.
In the ICD-Refinitiv Islamic Finance Development Report 2019, Brunei successfully maintained its ranking as one of the top 10 performing Islamic finance markets out of 131 countries.
The report takes data accumulated in 2018. Brunei scored 45 points in the Islamic Finance Development Indicator (IFDI), which placed the nation at the 10th position in 2019 and third in the ASEAN region after Malaysia and Indonesia.
Brunei also managed to remain in the top 10 position in the Awareness indicator. Brunei rose from third to second place for Seminars, with the country ranking in the top five nations for Islamic Finance Events in 2018.
The report indicates Brunei as one of the countries with a strong regulatory landscape. Brunei ranked top five under the Governance indicator, rising from seventh to third under the Corporate Governance sub-indicator.
In terms of asset growth, the report indicates Brunei in the top 10 positions in Takaful assets. Brunei is one of the top three countries with the fastest growing markets in Takaful assets, with an increase from BND491.8 million in 2017 to BND546.1 million in 2018.
The country’s Islamic banking assets also recorded a slight increase from BND11.2 billion in 2017 to BND11.7 billion in 2018, accounting for about 90 per cent of the total Islamic finance market share of assets. Additionally, net asset value of Islamic funds increased from BND95.5 million in 2017 to BND102.1 million in 2018.
Brunei continues to move towards achieving Islamic finance excellence by creating a progressive Islamic finance ecosystem on par with international best practices and in line with the local market needs.
In 2017, AMBD embarked on the establishment of the Domestic Money Market Project consisting of three milestones.
Under the first deliverable, AMBD issued a notice to introduce an averaging mechanism to the Minimum Cash Balance (MCB) requirement which provided banks with greater flexibility in their daily liquidity management, effective from December 1, 2017.
In 2018, AMBD introduced the Syariah-compliant and conventional overnight standing facilities. The service aims to facilitate the smooth functioning of the financial system through the lending/funding facilities and deposit/acceptance facilities.
The introduction of these facilities also created a level playing field for both Islamic and conventional banks in Brunei Darussalam and the tenor for the facilities are on an overnight basis, offered to licensed banks in the country.
The AMBD Islamic Bills Programme is the third and final deliverable under AMBD’s Domestic Money Market Project.
A signing ceremony was held on October 13, 2020 for the AMBD Islamic Bills Programme with banks in Brunei.
The programme aims to support liquidity management for banks in Brunei. It also aims to expand the list of available money market instruments for AMBD and the domestic financial sector.
The inaugural AMBD Islamic Bills Programme is based on the Syariah concept of Wakalah bil Ujrah. It is the first Syariah structure of its kind to be used for Sukuk issuance in Brunei.
During the signing ceremony, it was shared that the introduction of AMBD Islamic Bills will be part of the short-term benchmark yield curve, and that it is hoped to be able to facilitate the development of other financial instruments in Brunei, particularly Syariah-compliant ones.
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