Brunei's Islamic banking sector brings together the banks, the public savings institution and the takaful operators licensed by the central bank, which offer interest-free contracts and, according to that bank, accounted for 57.5% of national financial assets in 2020.
A financial system that is mostly Sharia-compliant
The central bank counts eleven Islamic financial institutions and put their assets at 22.3 billion Brunei dollars in 2020. Few countries have a Sharia-compliant offering that outweighs conventional finance in this way rather than merely sitting alongside it.
From TAIB savings in 1991 to a full-service bank in 1993
The sultanate's first Islamic financial institution, Perbadanan Tabung Amanah Islam Brunei, opened in 1991. Two years later the International Bank of Brunei converted and became the Islamic Bank of Brunei, the first Islamic bank offering the complete range of commercial services.
2005: the merger that created Bank Islam Brunei Darussalam
The Islamic Bank of Brunei merged with the Islamic Development Bank of Brunei to form BIBD. The combined entity is described as the largest bank in the country of any kind, serving individuals, companies and project finance clients across its range.
Why TAIB is not a commercial bank like the others
TAIB was first designed as a public savings fund for Muslims, notably with the pilgrimage in mind. It does not offer the full range of a commercial bank, but it owns subsidiaries that are active in takaful and in Hajj-related services.
Which law governs Islamic banking in Brunei?
Islamic banks now fall under the Islamic Banking Act, chapter 168, which derives from the Islamic Banking Order of 2008. Separate from the conventional banking law, it sets the licensing, governance and supervision conditions specific to Sharia-compliant institutions.
Minimum capital and a mandatory Sharia board
When adopted, the 2008 order required minimum capital of 100 million Brunei dollars for a local Islamic bank and 500 million for a foreign one, together with a Sharia advisory body made up of at least three scholars.
Sharia oversight on two levels
At the top, the Syariah Financial Supervisory Board, set up in 2006 with the central bank as its secretariat, issues the reference rulings. Each institution then has its own Sharia advisory body, which approves products and contracts against those central positions.
Takaful, governed by a separate order since 2008
Islamic insurance falls under the Takaful Order of 2008, distinct from the banking rules. Operators manage participants' funds built on mutual help and donation, which removes the gharar and maysir that scholars object to in conventional commercial insurance.
Short sukuk al-ijara to park bank liquidity
Since 2006 the state has regularly issued short-term sukuk al-ijara backed by leased public assets. They give Islamic banks a safe, interest-free home for surplus cash, a recurring problem when the standard interbank instrument is built on an interest rate.
Central bank I-Bills since 2020
In 2020 the central bank added its own Islamic bills, known as I-Bills, to absorb institutions' excess liquidity. Corporate sukuk al-ijara had existed since 2005, and the securities market is governed by the Securities Markets Order of 2013.
From AMBD to BDCB, a single regulator
Autoriti Monetari Brunei Darussalam, created in 2011, was renamed Brunei Darussalam Central Bank in 2021. It licenses and supervises Islamic banks, conventional banks and takaful, in an economy whose currency remains interchangeable at par with Singapore's.
What to ask before opening an account or taking finance
Ask which contract is used, murabaha, ijara or diminishing musharaka, request the full payment schedule and the late-payment treatment, and see the in-house Sharia body's opinion. A product's conformity is judged by that board, not by a marketing label.
Specialist external source
The Brunei Darussalam Central Bank website sets out the laws governing Islamic banks and takaful, the list of licensed institutions and the government sukuk programmes.