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.