Islamic Banking in Brunei

I was sitting next to someone from HSBC Amanah Bank last night during dinner. HSBC Amanah is the Islamic Bank of HSBC operating in the middle east. They have been very influential in being at the forefront of Islamic banking there which surprised me completely when I first heard it. According to this person who is currently based in Riyadh, the banking system in Saudi Arabia up to about five years ago was based on conventional banking with the exception of one small bank. HSBC became the first non-Islamic bank to convert their banks into Islamic bank, first by converting five branches before completely changing the whole bank into an islamic one. The other banks in Saudi realised just how many people are attracted into the new Islamic bank and decided to convert too.

Next to me was a Malaysian banker and she mentioned that we ought to be 'insaf' that it is a non-Islamic bank which first converts itself when we should be the ones to do it first. She also had an interesting story as well. She told me that she went to the middle east some years ago wanting to visit a Takaful there only to be told that at that time there were only two takafuls throughout the world and both were then in Malaysia.

Today Islamic banking has gone a long way. Yesterday, during the conference organised by the MOF and the Islamic Financial Services Board, I listened to one speaker from the USA talking about how they managed to set up an Islamic mortgage for American muslims but still with work within the Federal National Mortgage Association more popularly known as the Fannie Mae system. A couple of days ago, I heard from the grapevines that the Japanese will be issuing bonds based on the islamic principles known as sukuks and even the US Treasury is contemplating it. I have not seen the official announcements yet but I am pretty sure that there are moves afoot trying to siphon the extra liquid in the Islamic financial world due to the high oil prices.

Even in Brunei, we have not been spared. OCBC which is a Singapore bank since last year already hold an Islamic bank license under our financial centre and is already attracting funds from overseas through the bank. The development of Islamic banking has gone a long way and has expanded rapidly over the last few years. Our own two Islamic banks now merging into Bank Islam Brunei Darussalam (BIBD) was designed to help it so that it can defend its territory in Brunei and to be able to expand overseas and compete regionally if not internationally. But there are some quarters who are still apprehensive about the move still preferring the old way of two local banks competing in our tiny market.

Islamic financial system is here to stay, like it or not. It is becoming acceptable alongside the conventional banking financial system. However, along with others, I for one sometimes doubt the current Islamic financial system and still preferring to use conventional banks and conventional insurance companies. My experience with takafuls have not been pleasant ones (such as premium rates rising despite massive drop in principal's values) and I am not alone with some quarters feeling that they have been shortchanged by seeing higher charges etc when they take out loans with Islamic banks. I am not so sure whether this is because we don't understand what's going on, or the system here charges or administers it differently, or there is a premium to be paid for going Islamic. However I would urge everyone including myself and the people who runs the Islamic bank to understand thoroughly what should be in the system and that the move towards Islamic banking should not be painful and should be well explained to everyone.


Anonymous said…
that is so true Mr speaker.....i mean we talk of instilling an islamic democratic, financal, social systems bla bla bla....but none of us takes heed or even make the effort to understand and appreciate the islamic systems. Just remeber this...the islamic system of running things/affairs....will always precede time and technological advancements in the future.
Anonymous said…
you are in the right position now to ensure how the islamic system is conducted.Invite the people concern and make them explain. That's why you are there man!
Anonymous said…
I'm currently working in a middle east country and to my surprise, the islamic banking is non existant apart from the option of not taking interest in own saving account. There is no such thing as takaful insurance here.
p o t a t o said…
I read an article about this during my Winter vac. Can't remember much but it was something along the lines of a non-Muslim in HSBC initiating the move.

They should have Islamic Economics for O Levels. It would be nice to have a second opinion.

Oh. There are interesting Islamic economics books at Solitude. Saja, share info. In case anyone is interested in this matter.

But honestly, shop around and compare. Don't get it because it's the hype, get it because it's the best for you (and your family and assets).
FlyBoy said…
I don't understand why when we have been given an opportunity to invest and save our money in Islamic banks, we still follow conventional banks.

I have had no problems with Islamic banks in Brunei as i am now a full-time fan on Islamic banking.

Conventional banks charge interest which is haram so why do we have to accept this when Islamic banking only provides dividends, which is halal. It may look the same but the 2 things are totally different.

From the Quran:
Those who practise usury will not rise from the grave except as someone driven mad by Satan's touch. That is because they say,' Trade is the same as usury'.
But Allah has permitted trade and He has forbidden usury. Whoever is given a warning by his Lord and then desists, can keep whatever he received in the past and his affair is Allah's concern.
But all who return to it will be the Companions of the Fire, remaining in it timelessly, for ever.

Anonymous said…
BR blogger should learn from comments written by FLYBOY - he's more matured and doesn't need 2 masters to understand how the islamic banking system works.. he's more positive too and this makes me and others positive about the difference between what is halal and haram; and between what is "nikah" and what is "zina"...if you get me..yes, you!The banking transactions may be the same in both islamic and conventional banks; the same as the sexual transactions (nikah vs zina)...but the halalness and haramness is only obvious to those who are islamic in their way of life...
Anonymous said…
Hmmm just wondering. Where does Brunei store its $$$$. A swiss bank or something? Or an Islamic Bank?
annonymous 190906/0756: thank you for the frank feedback and i appreciate your honesty, no matter how painful it is - i agree with your assessment on Flyboy who i know personally, is more mature on the matter of the faith; and also with Flyboy's opinions who in all his postings on this blogsite and on his former blogsite has been very patient in pointing the righteous ways - there should not be any two ways about it.

the question that i raised is much more on the workings of the local institutions in the application of the system. in our discussions with the middle eastern bankers and the malaysian bankers in the various meetings and conferences, the general consensus is that there are still many things which needed harmonisation as interpretations of the hadiths differ between countries which alhamdulilliah the islamic scholars are still working on to iron out.

but again while waiting for the harmonisation to be resolved, this should not deter one from moving onto islamic banking away from the conventional banking, a step which i am undertaking.

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