Islamic finance and banking remains at the heart of the country’s interests in growing the overall finance sector alongside conventional banking. The industry has been identified as one of the key focus areas under the Brunei Darussalam Financial Sector Blueprint (BDFSB).
The blueprint affirms the country’s vision and commitment to strengthen its position as an international Islamic financial hub with a diverse foreign presence and higher level of participation in the domestic Islamic financial markets, particularly in the sukuk and Takaful market.
The country aims to strengthen its regulatory and legal framework, in addition to ensuring standardisation of Islamic products and services aligned with international practices.
According to the blueprint, Brunei will continue to accelerate the internationalisation of Islamic finance through several initiatives, establishing a more significant role for the financial system in the intermediation of international financial flows. This will involve introducing more innovative Syariah-compliant financial products to meet diverse global demands.
Brunei Darussalam’s Islamic financial ecosystem comprises Islamic banks, Takaful operators, Islamic investment dealers, sukuk and other ancillary services. The Brunei Darussalam Central Bank (BDCB) and local Islamic financial institutions join the international community through the membership under the Islamic Financial Services Board (IFSB).
Brunei has a two-tier Syariah governance structure comprising the Syariah Financial Supervisory Board (SFSB) and an internal Syariah Advisory Body (SAB).
The SFSB was established under the Syariah Financial Supervisory Board Order 2006. With BDCB as its secretariat, SFSB has a mandate to ascertain the Islamic law on any financial law, to issue rulings referred to it, and to advise on any Syariah issues relating to Islamic financial businesses, activities or transactions.
An internal SAB within an Islamic financial institution may consult with the SFSB through BDCB for Syariah matters related to businesses based on Syariah principles.
Islamic finance activities are governed under the Islamic Banking Order (2008) for Islamic banks and Takaful Order (2006) for the Takaful sector. Islamic capital market activities are governed under the Securities Market Order 2013, with the Securities Markets Regulations 2015 as the supplementary legislation.
In order to prepare a well-established infrastructure for Islamic finance, a key initiative was developed, namely the Syariah Governance Framework (SGF). The purpose of the framework is to ensure that the structure, processes, products and services of Islamic financial institutions align with Syariah principles.
Audits will be conducted to ensure products and services provided by these financial institutions comply with Syariah principles. Financial institutions will also need to adhere to the product approval guidelines, which include a set of procedures to follow when determining the category of approval required from SFSBD for new products or any enhancement or variation of an existing product.
Through the establishment of the Brunei Institute of Leadership and Islamic Finance (BILIF), the Sultanate has made efforts in shaping future leaders, experts and innovators in the industry. BILIF, under the purview of the BDCB, provides learning solutions, events and services for human capacity development in the areas of Islamic and Finance. As of 2020, BILIF has conducted over 400 programmes and 50 events for more than 10,000 participants, including a new suite of Virtual Instructor-Led Training (VILT) programmes and online events.
In August 2021, the learning institute organised its first Syariah Advisory series Putting Theory into Contemporary Applications. The event covered topics on Syariah matters and issues including contemporary applications of different contracts used in Islamic finance, and regulatory considerations alongside legal documentations.
With the continuous efforts in developing its Islamic banking industry, Brunei ranked 11th out of 135 countries in the ICD-Refinitiv Islamic Finance Development 2020 report. The report includes an indicator that measures the overall development of the Islamic finance industry across more than 10 key metrics including knowledge, governance, CSR and awareness.
Brunei ranked top five for the awareness indicator and ranked second in the conference indicator due to events such as the Brunei Mid- Year Conference and Exhibition. The country was also ranked in the top five highest share of Islamic banking assets to total banking assets in 2019.
The Islamic finance sector in the country has witnessed significant growth in market share over the total financial sector in terms of assets. In the first quarter of 2020, Islamic banks’ total assets were valued at BND11.4 billion compared to BND6.9 billion for conventional banks. In the insurance/Takaful sector, assets of Takaful operators grew by 6.2 per cent year-on-year, reaching BND595.7 million as at 2020.
On the education level, Universiti Islam Sultan Sharif Ali (UNISSA) through its Islamic Economics and Finance Faculty (FEKIm) signed a memorandum of understanding (MoU) with the Islamic Banking and Finance Institute Malaysia (IBFIM) to enhance students’ understanding on Islamic finance.
The MoU aims to promote cooperation in education and training under the Association Qualification in Islamic Finance (AQIF) offered by IBFIM as a reciprocal arrangement and mutual benefits for both parties.
In a boost of producing Islamic banking professionals, nine FEKIm undergraduates received their AQIF certificates at the 2020 UNISSA Convocation Ceremony.
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