The legal framework of conventional finance, unmodified, is not suitable to cater to Islamic finance. This does not mean that that a new separate regulatory and legal framework for Islamic finance is needed in all aspects. Where similarity exists, the principles and concepts can be extended to Islamic finance e.g. in matters like transparency, accountability, conflict of interest etc. This assistsIslamic finance, as the regulators do not have to start from scratch. Furthermore, the long experience of conventional finance could be used to make Islamic finance industry more resilient.
It is necessary to have an adequate legal and regulatory framework for Islamic finance but it must also be understood that there are many things beyond its reach:
The success of and spread of a product or of an institutional-operational Model for the financial industry must not be allowed to depend on the rules It is not the regulator’s or supervisor’s job to determine the economic needs of the market, the products and the services that firm and households need. Selection of the enterprises that offer financial services and products is up to the market. Market participants, for their part, must observe the rules, whose objective in the financial sector is to ensure stability, transparency, investor protection, and hence a level playing field among financial institutions
To strengthen Islamic finance industry, there must be proper legal and regulatory framework.The Shariah Financial Supervisory Boards (SFSB) Order introduced in 2006 enhances the Shariah governance and supervision and accords the board the power to make Shariah rulings on Islamic transactions.
The first Islamic banking legislation of Brunei Darussalam to regulate the Islamic banking industry is The Islamic Banking Act of Chapter 168 enacted on Dec 2, 1992. This provided the legislative vehicle for the institution of Islamic banking.
The Ministry of Finance in 2008 introduced the Islamic Banking Order 2008, intended at expanding the Islamic banking sector in Brunei while increasing the competitiveness among players by creating a level playing field as well as strengthening the supervision and regulation of Islamic banking activities. 32 This new legislation also aims to attract foreign participants to strengthen the industry as a whole and to nurture local knowledge and expertise.
In the same year, Takaful Order 2008 was introduced. The Order is a new comprehensive legislation to govern the activities of the domestic takaful industry and provide the legal platform for a level playing field between conventional insurers and takaful operators.33The Takaful Order of 2008 has made some changes where there are different requirements for Takaful operators to carry out Family Takaful and General Takaful. As a result, the local Takaful companies need to re-strategize their business models since given the small local market size and increasing operational costs, the profit margins will reduce considerably. The apparent move would be for the Takaful business to be less dependent on standard insurance products such as the car insurance, which is their existing dominant sector, and to venture into new opportunities such as corporate industrial activities. As comparison, the newly passed (Malaysian) Islamic Financial Services Act 2013 also require Takaful operators to choose either Family Takaful or General Takaful with dateline already set
The previous Islamic Banking Act of 1992 consist of seven parts; the core parts covering issues on licensing, financial requirements, ownership, restrictions on business, supervision and control of Islamic banks. The new 2008 Order is more detailed in its text, comprising of 11 parts. The main core of the text covers similar grounds but is all-inclusive and up-to-date with the ever-changing banking environment.
The 2008 Order also re-defined ‘Islamic banking business’ as a business whose aims and operations are not contrary to Hukum Syara, this meaning, the Laws of Islam according to the four major schools of Ahlus Sunnah Wal Jamaah. It is interesting to note that in the matter of definition, licensed offshore companies (under the International Banking Order 2000) is also now allowed to carry on Islamic banking business. This will accelerate the development of the industry
In addition to Islamic banking, Brunei also aims to increase the penetration rate of Takaful and insurance products among its population. Figures show that Takaful take-up in Brunei has grown; with assets held by Takaful providers more than doubling between March 2011 and June 2013, from US$150 million to US$349 million – slower than for conventional providers, according to data from the Autoriti Monetari Brunei Darussalam.
Briefly, the Bruneian Islamic banking and Takaful are governed by the Islamic Banking Order 2009 and Takaful Order of 2008 respectively. In addition, there is also the statutory Tabung Amanah Islam Brunei (TAIB) Act to regulate the Islamic finance sector. Other governing acts include the Finance Companies Act and the Deposit Protection Order.
Beside comprehensive legal framework, it is also essential to have strong regulatory support. In January 2011 a new unified monetary authority was established. Before the creation of the Autoriti Monetari Brunei Darussalam or ‘Monetary Authority of Brunei Darussalam’ (AMBD) in 2011, the regulatory bodies included the Ministry of Finance, the Financial Institutions Devisions, the Brunei Currency and Monetary Board, the Brunei Investment Agency, the Revenue and International Research Divisions and the Brunei International Financial Centre (BIFC). The AMBD is a statutory body that acts as the central bank of Brunei. Its core functions include the formulation and implementation of Brunei’s monetary policies, the supervision of Brunei’s financial sector and currency management.
From the legal and regulatory aspect, the implementation of the international regulatory and supervisory standards and best practices for Islamic finance is necessary. The Islamic Financial Services Board (IFSB) has introduced prudential standards for the Islamic financial services industry – in all key areas of capital adequacy, risk management, corporate governance and Shariah governance and their implementation would promote more consistent regulatory and supervisory frameworks. A survey conducted by the IFSB in 2011 indicated that 9 countries have implemented the standards issued by the IFSB and that 18 countries are expected to implement them within the next five years. Their consistent implementation will be vital since this harmonization will also facilitate consistent participation in Islamic finance across borders and contribute towards global financial stability.
Get Started Now!
- Automotive industry
- Capitalist Economies
- Critical inquiry
- Customer’s Satisfaction
- FINANCIAL CRISES
- Hospitality Sector
- INTERNATIONAL CAPITAL
- Job Satisfaction
- ORGANIZATIONAL DESIGN
- Payday Loans Online
- RESULTS OF PRODUCT-PRICE STUDIES
- Social Constructionism
- Speedy payday loans
- Water Treatment
Tagsachievement affiliation need allocation of capital Authoriti Monetari Brunei Darussalam Brunei International Financial Centre Capitalist Economies Coaching Conservation Core critical inquiry cross-border capital Customer’s Queue Customer’s Satisfaction Demand Side Management Electricity Employee Turnover End Use external imbalance factors to Job Satisfaction Finance fiscal deficits Foreign Language Proficiency Front Office Staff Hermeneutic Approaches Hospitality Sector international trade Job Bumout Job Satisfaction Labour language and communication Luxury Hotels macroeconomic management methodological lessons Periphery Portfolio diversificatio product-price Residential rewards Ricoeur’s Tripartite Method Semi-Periphery SERVQUAL Social Constructionism South Africa Stress teaching and learning