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Friday, 13 April 2012

Brunei must find niche in Islamic capital markets

MUARA, Brunei - Brunei's Islamic finance sector must find a niche in Islamic capital markets and reposition itself to find new opportunities in order to catch up with other industry players in the region, an expert said.

Sri Anne Masri, managing director of Pro Ethica Training and Research, said more building blocks are needed in the country to pave a way for the creation of more Islamic products and services such as equity funds, wealth management, and murabahah.

"Just looking at sukuk, we are far behind our Malaysian counterparts," said Sri Anne during a seminar co-hosted by Universiti Brunei Darussalam's Faculty of Business, Economics and Policy Studies (FBEPBS), Sultan Omar 'Ali Saifuddien Centre for Islamic Studies of UBD and the United Kingdom's Markfield Institute of Higher Education (MIHE).

Malaysia has issued US$26 billion (S$33.8 billion) worth of sukuk to date, compared to Brunei's $3.851 billion since the government's first issuance on April 6, 2006.

"Islamic finance has been running for 20 years and challenges and opportunities has cropped up in the market. The overview of Brunei's market shows that the Sultanate has political stability, strong Islamic framework and a strong regulatory framework.

"Brunei has the capacity and is financially capable to spearhead the finance industry from oil and gas towards economic diversification through strong government to grow Brunei into an Islamic financial hub," said Sri Anne.
However, Sri Anne said that Brunei is not pacing fast enough compared to regional players and is important for the country to find a niche in areas such as Islamic private wealth management, Islamic advisory services and private equity.

Once pending regulations from Autoriti Monetari Brunei Darussalam (AMBD) are finalised, it will help in creating the necessary infrastructure for Islamic capital markets, she said.
"With this we will move forward. What is more important is to see what products the market is interested in so they can build the supply base to attract foreign investors into Brunei and build it up from there," she said.

During a question and answer session that followed, Sri Anne said fear of failure is hindering many players in Islamic finance from progressing.

"But failures are what make us better. Looking at sukuk defaults in 2007, what happened in the Islamic finance industry in Saudi or the US, that has made us better now. The international players in terms of sukuk issuance are more careful in looking at the substance of the sukuk contracts," she said.

"We don't want to make ourselves too close to conventional (banking) and just change the name from bonds to sukuk without having the real essence tied into it.

(Asia One Business / 12 April 2012)

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