Despite its oil wealth, Brunei is a relatively limited market for financial services. There is however a strong commitment amongst a substantial segment of the local population, and the government itself, to Islamic finance.
The main activity is and will continue to be Islamic retail banking, including the provision of Shariah compliant deposits including Mudarabah investment accounts. Islamic financing through Murabahah and Ijarah is already well established. The potential for car financing is limited but home finance through diminishing Musharakah offers considerable potential.
Local banks compete with foreign banks in Shariah compliant wealth management, but the client base is very limited. Takaful is already offered, and there is the potential for a steady flow of business. Overall the Brunei market has reasonable prospects, but the further development of Islamic finance will be evolutionary, not dramatic.
Islamic finance in Brunei started with the issuance of a sovereign short-term Sukuk and it may further consolidate its position in the Islamic capital market. Brunei could become a hub for investment vehicles such as funds, special purpose vehicles and other investments by further enhancing its regulatory framework to accommodate all aspects of the Islamic financial system and therefore be able to match the pace of development of Islamic finance in Southeast Asia.
IJLAL AHMED ALVI
CEO, International Islamic Financial Market