Overview
Islamic Finance has become one of the key sectors in the financial services industry of Brunei Darussalam. Prominent for its strong Islamic philosophy, Brunei Darussalam envisions itself to become one of international Islamic financial hubs. In light of this, Brunei Darussalam Central Bank (BDCB) continues to support the development of sound and progressive financial sector, and in doing so has identified Islamic finance as a key focus in its Financial Sector Blueprint 2016-2025.
Brunei Darussalam's Islamic financial ecosystem now comprises of Islamic banks, takaful operators, Islamic investment dealers, sukuk and other ancillary services. Islamic financial assets are more than 50% of the total market share. There are efforts underway to deepen the Islamic financial market.
Regulatory Landscape in Islamic Finance
Brunei Darussalam has a dual financial system consisting of conventional and Islamic Finance.
At present, Brunei Darussalam has a two-tier Syariah governance structure comprising of:
- A centralised Syariah Financial Supervisory Board (SFSB), for which Syariah Finance, BDCB is the secretariat. The SFSB is established under the Syariah Financial Supervisory Board Order, 2006. It has a mandate to ascertain the Islamic law on any financial matter, to issue rulings on matters referred to it, and to advise on any Syariah issues relating to Islamic financial business, activities or transactions
- The Syariah Advisory Body (SAB) at the institutional level plays a complementary role to the Syariah Financial Supervisory Board. Its role is to advise the institution on Syariah compliance of banking operations.
Islamic finance activities are governed under the Islamic Banking Order (2008) for Islamic banks, Takaful Order (2008) for the takaful sector and Islamic capital market activities are governed under the Securities Market Order, 2013, and its supplementary legislation the Securities Markets Regulations, 2015 (SMR). These legislations are administered by BDCB providing BDCB the authority to supervise and regulate them in a manner that maintains financial stability. Islamic finance institutions are subject to the same prudential standards and reporting requirements as conventional financial institutions.
BDCB has also introduced additional regulatory requirements that the Islamic Financial Institutions need to comply. These include the Syariah Financial Supervisory Board Order (SFSB), 2006, Notice and Guidelines to Financial Institutions on Syariah Governance Framework, Guidelines on Internal Syariah Audit Framework and Guidelines on The Islamic Product Approval Process under Section 14 of Syariah Financial Supervisory Board Order 2006.
