THE Islamic finance sector in Brunei has shown "impressive" growth over the years, but it's no reason for players to be complacent, said an executive at BIBD At-Tamwil, the financing arm of Bank Islam Brunei Darussalam (BIBD).
Roland Ti, BIBD At-Tamwil's marketing and public relations manager, spoke to The Brunei Times on Brunei's Islamic financial landscape and his thoughts on what it takes to bring the Islamic finance institutions to a "golden age".
Can you give us an overview of Islamic finance in Brunei and how it began?
Islamic finance concerns the provisions of financial services or financial products which are compatible with the principles of Islam and Syariah. As a brief history, the emergence of Islamic finance in Brunei was started with the establishment of TAIB (Tabung Amanah Islam Brunei) on September 29, 1991, by His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam. This was followed by the conversion of International Bank of Brunei to the Islamic Bank of Brunei on January 13, 1993, followed by the establishment of the Islamic Development Bank of Brunei seven years later in July 2000. The later two were then merged into what is now known as the Bank Islam Brunei Darussalam with a view of increasing the prominence of Islamic financial institutions (IFIs) as well as gaining the necessary economies of scales and size to compete with bigger and better capitalised international players.
The existence of IFIs fulfils Islamic society's need or fardu kifayah, without which, society has no option but to be involved in riba or interest-based banking. This was and still is the reason for the emergence of IFIs as aspired by His Majesty's Government.
Relative to conventional banks which have been operating in Brunei for over half a century, yes, IFIs are just starting to become more visible. Although relatively new, IFIs have been well received in the country, where the majority of the population are Muslims. For instance, the BIBD Group is now the biggest IFI in Brunei, both in terms of its consolidated balance sheet size and capital base. Having said this, IFIs should not become complacent as much remains to be done.
How can Bruneian business leverage on Islamic finance for the future?
Moving forward, the future of IFIs, we think, goes hand-in-hand with the 'future' of our customers. The simple acid tests for IFIs are: (1) are IFI customers better off by choosing IFIs relative to customers of conventional banks; (2) are they growing and building up real wealth and do they benefit from banking with IFIs, in real terms; (3) are IFI customers getting a 'fair deal' when they use Syariah-based financial products and services; and (4) are IFI customers able to meet their 'short-term' needs whilst still protecting their and their families' 'long-term' interests.
If the answer is yes to all these questions, then we are confident that the future of IFIs is definitely bright. There will be no need to 'talk' of how good and just IFIs are. The evidence is clear for all to see, and thereafter, IFIs will definitely flourish and grow at a much more rapid speed. If Islamic banking cannot differentiate itself from conventional banking, this will ultimately dilute its attractiveness.
To position Brunei as an Islamic hub must first require strong local financial institutions to grow and become strong and to grow regional. We also need differentiation an 'X factor' that our competitors do not possess. What we need is an 'IFI value proposition' that is truly unique and truly Bruneian. In our opinion, this also requires us to innovate and think of a new product innovation that is centred not only around Syariah requirement, but also meets the 'spirit' of Islamic teachings as demonstrated above.
Whilst the growth of IFIs in Brunei is impressive, cumulatively capturing roughly half the market, we can also see that IFIs lag behind in the rapid innovations in financial markets. However, whenever we talk about innovations, for IFIs this means having to look at it from a very unique vantage point of Islam and avoid the excesses of conventional finance (which caused the global financial crisis in 2008).
Where Brunei lack in market size, we can progress through technological innovations, capitalising on our intimate knowledge of the IFI market, leveraging on our country's Islamic image and gaining competitive edge against bigger, but less agile competitors to cope with an ever-increasing competitive pressures. To do this will first require us to build human talent capital the most scarce resources in any business world the best-of-the-best people to take Brunei's IFIs forward into a new 'golden age'.
And what of the work done by At-Tamwil?
At BIBD At-Tamwil Berhad, innovation is a key thrust for growth, and we believe that the (four) IFIs acid tests .... are not just idealistic or beautiful words written on a piece of paper. We believe that it can be realised through product innovations, incorporating Islamic teachings such as ethics, social justice, morality, equality, fairness and equality which are universal values to all mankind. The incorporation of the 'spirit' of Islam will not only make IFI products Syariah-compliant or Syariah-based, but beyond that, it will demonstrate the beauty of Islamic teachings as transpired in the practices of Islamic banking.
Spiritually, this can also be regarded as Ibadah the preaching of values of Islam that society benefits from.
BIBD At-Tamwil's Real Savers Initiative is one such example where we genuinely believe that this initiative will be able to contribute to the improvement of society's well-being or public interests and their financial securities. Through the introduction of My Real Savings Account products, we believe that we can balance between the public interests and our commercial values, with that of Syariah principles or Islamic values. Of course, this initiative will take some time to mature. We are not choosing either one whilst forfeiting the other. Through such innovation, we can achieve both point objectives of profitability whilst attaining real value of society's well-being, which is a win-win value proposition for all.
IFIs therefore must be a force for good and this can be achieved through product innovations which is not in any way, copying conventional banking products, but going beyond that, encapsulating the 'spirit' and in accordance with the true teaching of Islam.
IFIs are not oppressive to any parties, be it to customer or to stake holders or even to the IFI itself.
BIBD At-Tamwil Berhad also believes that the WIEF (World Islamic Economic Forum) recommendations such as the development of social development initiative to be propagated and developed in Islamic societies and resources for the benefits of youth and women, collaboration to develop 'green growth' road maps and the support of halal economy through collaborative development standards and convergence with mainstream economy, can be undertaken by IFIs in a way and in a manner to the benefits and achieve aspirations which we have aforementioned. The Brunei Times