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ISLAMIC FINANCE IN BRUNEI: Domestic Market

Posted by Connie R. Aponte on March 3, 2014 in Finance |

The percentage of the Muslim population in Brunei is high and this contributed to the popularity of Islamic financial products there. Having introduced the Islamic finance option more than two decades ago, Syariah-compliant banking now accounts for around 40 per cent of the local market, a figure some experts believe would rise to 60 per cent by 2017.

Islam is Brunei’s official religion with 64 percent of the population being Muslim, mostly Sunnis of Malay origin who follow the Shafi school of Islamic law, similar to Malaysia. Since the 1930s sultans have used rising oil revenues to provide an extensive social welfare system and promote Islam, including subsidizing the Hajj (pilgrimage), building mosques, and expanding the Department of Religious Affairs.12The domestic market for Islamic finance is however not that big since the population is only around 408, 000, and only half is local.

However, this is not a problem. For the locals, various Islamic financial products can be offered to cater to domestic needs. Islamic financial products are important as it enables the locals to fulfill their religious needs. Islamic finance enables Muslims to conduct their daily transactions in ways that are Shariah-compliant. The holy Qur’an has talked about the prohibition of usury orriba in many places in chronological order.

While catering to the religious needs of the locals is understandable, it would be a great waste of opportunity if the global market were not targeted simultaneously. The size of Islamic finance market is around US$1.6 trillion with an estimated potential of at least US$5 trillion.

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