Islamic Finance 

Bank Islam Brunei Darussalam: The growth and future of Islamic finance

| 02 January, 2018 | General
 Mubashar Khokhar, Managing Director of Bank Islam Brunei Darussalam
Bank Islam Brunei Darussalam: The growth and future of Islamic finance
Photo: <span class="highlight">Brunei</span>ans display national flags as they march past the royal dais during the 27th celebrations of<span class="highlight">Brunei </span>National Day in Bandar Seri Begawan February 23, 2011. REUTERS/Ahim Rani

This article is sponsored and produced by Bank Islam Brunei Darussalam as part of the ICD-Thomson Reuters Islamic Finance Development Report 2017.

The report can be downloaded from HERE.

The global Islamic finance industry has grown rapidly over the past two decades, reaching total assets of US$ 2.2 trillion as of the end of December 2016 - an increase of 7% over 2015. In keeping with this growth, Shariah-compliant financial products and services have increased their reach to more than 50 Muslim and non-Muslim countries. 

Even Asian financial powerhouses such as Japan, South Korea, Hong Kong and China with established conventional banking foundations have shown interest in developing Islamic banking markets, creating further opportunities for Islamic institutions to tap into.

Stronger governance and regulatory frameworks

As Islamic finance and Shariah-compliant ecosystems continue to develop and build momentum, there has been an encouraging shift towards the institutionalisation of governance and regulation of key players within the sector, demonstrating the market’s increasing maturity.

In Brunei, the national Shariah Financial Supervisory Board was established in 2006 to enhance governance and supervision of Islamic products, with the aim of stimulating growth in the industry. In predominantly Muslim countries, governments have enacted laws such as the Islamic Financial Services Act 2013 in Malaysia and Act No. 21 of 2008 in Indonesia to provide Shariah-compliant legal frameworks for the regulation of Islamic banks and their business operations. 

There is also growing demand for Islamic finance in non-Muslim countries, fuelled by individuals and corporations seeking safe and ethical banking solutions. This broader popularity is evident in the UK Financial Services Authority’s policy of fairness and justice, which is in line with the guidelines set out by the Islamic Financial Services Board. The recent development of SRI (socially responsible investing) and green sukuk, and their popularity with both Muslim and non-Muslim investors, is a further case in point.

Progressive and inclusive approach

While Islamic finance is informed and guided by religious principles, it should not be viewed merely as a tool for Muslims to have a separate banking system. The success and growing popularity of Islamic finance can be attributed to its confluence with ethical and responsible banking principles such as transparency and the avoidance of excess uncertainty and exposure to risk. These are characteristics that are not only consistent with Islamic laws, but are the fundamentals of common-sense banking principles.

There remains great potential for further growth in Islamic finance through the development of a wider ecosystem of offerings for clients and customers. Beyond sukuk, we have also seen takaful – or Shariah-compliant insurance – gain prominence too. The global takaful insurance market experienced 13-14% annual growth in the years 2012 to 2015. 

Moreover, the rise of fintech (financial technology), though regarded as an industry disruptor, presents huge potential for innovative partnerships and developments in areas such as regulatory technology, P2P takaful platforms, automated Islamic wealth management portals, or online remittance platforms in compliance with the concept of Bay al-Sarf, among others.

Islamic finance outlook

The Islamic finance sector is expected to continue to expand in 2018, notwithstanding geopolitical issues and the subdued economic prospects in core Islamic finance markets due to low oil prices.

There are several encouraging trends that could contribute to further growth in the industry. The prominence of responsible finance, impact investing, and the United Nations’ Sustainable Development Goals in recent years has led to greater awareness of Islamic finance as they share objectives in creating an equitable financing system that has a positive impact on society. This could open the way for greater collaboration between organisations to develop Shariah-compliant financial products that appeal to both Muslim and non-Muslim customers.

We are also encouraged by the Accounting and Auditing Organization for Islamic Financial Institutions’ efforts to standardise accounting standards within the Islamic finance industry with the development of the Accounting Standard FAS 30 on impairment and credit losses. The move towards standardisation – whether in accounting practice, documentation, or even interpretation of Shariah law – will set the foundation for closer collaboration and growth within the Islamic finance industry.

The BIBD case study

As the foremost Shariah-compliant licensed bank in Brunei, Bank Islam Brunei Darussalam (BIBD) is ideally positioned to seize the opportunities presented by rising demand for Shariah-compliant products from the Brunei government, government-linked corporations (GLCs) and SMEs, particularly with its robust approach to governance. We see here the potential to promote development, boost shared prosperity, and make meaningful contributions to the economy and society as a whole.

At the same time, we are committed to constant innovation in order to propel our development and position BIBD for future growth. We currently lead the Brunei market in introducing innovative solutions to our customers such as a mobile banking app, a customer-driven contact centre, payment via QR code, biometric ATMs, cardless withdrawals, virtual cards, and e-vouchers.


The institutionalisation of Islamic finance is an encouraging trend, and will ensure a stringent control and safety system as the industry continues to develop and mature. At the same time, the industry needs to adapt in order to capture new opportunities.

After all, a progressive dedication towards the integration of Islamic principles with the needs of an increasingly global customer base was what enabled the Islamic finance industry to achieve the esteemed standing it has today.


Report: ICD-Thomson Reuters Islamic Finance Development Report 2017

© Thomson Reuters 2017 All rights reserved

Mubashar Khokhar is a financial services professional with more than 30 years’ experience across fifteen developed and emerging markets, including the USA, Europe, Asia, Africa and Gulf Cooperation Council (GCC) member states. Prior to his role as Managing Director at Fajr Capital, Mr Khokhar was CEO of Ajman Bank, a publicly listed Shariah-compliant bank in the UAE, and also served as CEO of Mashreq Al-Islami (formerly Badr Al-Islami), a wholly owned subsidiary of Mashreq Bank. During his tenure, Ajman Bank received widespread industry recognition, including the coveted ‘Best Domestic Bank’ award in 2011. Mr Khokhar has previously served on the boards of directors of Badr Al-Islami and Samba Pakistan Ltd, and held senior positions in American Express Bank and Bank of America. He has an MBA and BBA (Hon.) from Ohio University, USA.

© Thomson Reuters 2017 All rights reserved