Source: M. Ebrahim and TK Joo. International Journal of Social Economics, Vol. 28 No. 4, 2001, pp. 314-337. MCB University Press
State of financial intermediation in Brunei Darussalam
The first bank in Brunei, prior to British colonialism, was established in 1935 and was called the Post Office Savings Bank. Japanese occupation destroyed most of the records of the bank. The first bank during British rule was the Hong Kong & Shanghai Bank (established in the mid-1940s and currently called Hong Kong Bank) followed by the Standard Chartered Bank. These banks were supported by the British administrators and followed conventional banking practices under British Law. Subsequent banks in Brunei include Malayan Banking (1960) followed by the United Malayan Banking Corporation (1963), the National Bank of Brunei (1964), Citibank (1971), the Island Development Bank (1980), Baiduri Bank (1992), TabungAmanah Islam Brunei (1992) and the latest, the Development Bank of Brunei (1995). In the mid-1980s, the National Bank of Brunei folded and the Island Development Bank (IDB) became the only local bank in Brunei. IDB was subsequently renamed the International Bank of Brunei and largely enjoyed the support of the Brunei Government. In 1993, the International Bank of Brunei was renamed the Islamic Bank of Brunei to administer the financial affairs of the community according to the lofty ideals of Islam.
Banks in Brunei are regulated under the Banking Act and Finance
Companies Act through the Ministry of Finance. There is no Central Bank in Brunei but the functions of monitoring are under the jurisdiction of the Ministry of Finance through the Brunei Currency Board, the Department of Financial Services and the Brunei Investment Agency. The Brunei Currency Board is in charge of controlling the money in circulation and maintaining currency interchangeability (fixed at par) with Singapore.
Islamic banking in Brunei
Of the total banks in Brunei Darussalam, the Islamic Bank of Brunei (IBB) and Tabung Amanah Islam Brunei (TAIB) are the only banks that offer Islamic banking services. The others offer financial services based on conventional banking practices. It is only in the early 1990s that Islamic banking facilities were available. The first Islamic bank came into being with the inauguration of TAIB in 1992, since it was regarded as a Fardu Kifayah (religious obligation) on the Muslim community. TAIB’s initial formation was as a trust fund whose prime function was to provide facilities for Muslims to make the pilgrimage to Mecca. The second Islamic Bank, IBB, was established in 1993 to provide Muslims with Islamic banking facilities mainly in trade and commercial finance. Between 1992 and 1997, IBB’s customer deposit base has grown tremendously from about BND386 million to about BND782 million. The core clientele base of IBB comprises the affluent and the middle class segment of the population. TAIB is similar to a savings and loan institution and is owned by the government. Its main objectives are to operate/promote Islamic financial services and to raise the socio-economic standards of the population. Between 1992 and 1996, the customer deposit base of TAIB rapidly grew two and a half times from BND118 million to about BND295 million.
State of financial intermediation in Brunei Darussalam
The first bank in Brunei, prior to British colonialism, was established in 1935 and was called the Post Office Savings Bank. Japanese occupation destroyed most of the records of the bank. The first bank during British rule was the Hong Kong & Shanghai Bank (established in the mid-1940s and currently called Hong Kong Bank) followed by the Standard Chartered Bank. These banks were supported by the British administrators and followed conventional banking practices under British Law. Subsequent banks in Brunei include Malayan Banking (1960) followed by the United Malayan Banking Corporation (1963), the National Bank of Brunei (1964), Citibank (1971), the Island Development Bank (1980), Baiduri Bank (1992), TabungAmanah Islam Brunei (1992) and the latest, the Development Bank of Brunei (1995). In the mid-1980s, the National Bank of Brunei folded and the Island Development Bank (IDB) became the only local bank in Brunei. IDB was subsequently renamed the International Bank of Brunei and largely enjoyed the support of the Brunei Government. In 1993, the International Bank of Brunei was renamed the Islamic Bank of Brunei to administer the financial affairs of the community according to the lofty ideals of Islam.
Banks in Brunei are regulated under the Banking Act and Finance
Companies Act through the Ministry of Finance. There is no Central Bank in Brunei but the functions of monitoring are under the jurisdiction of the Ministry of Finance through the Brunei Currency Board, the Department of Financial Services and the Brunei Investment Agency. The Brunei Currency Board is in charge of controlling the money in circulation and maintaining currency interchangeability (fixed at par) with Singapore.
Islamic banking in Brunei
Of the total banks in Brunei Darussalam, the Islamic Bank of Brunei (IBB) and Tabung Amanah Islam Brunei (TAIB) are the only banks that offer Islamic banking services. The others offer financial services based on conventional banking practices. It is only in the early 1990s that Islamic banking facilities were available. The first Islamic bank came into being with the inauguration of TAIB in 1992, since it was regarded as a Fardu Kifayah (religious obligation) on the Muslim community. TAIB’s initial formation was as a trust fund whose prime function was to provide facilities for Muslims to make the pilgrimage to Mecca. The second Islamic Bank, IBB, was established in 1993 to provide Muslims with Islamic banking facilities mainly in trade and commercial finance. Between 1992 and 1997, IBB’s customer deposit base has grown tremendously from about BND386 million to about BND782 million. The core clientele base of IBB comprises the affluent and the middle class segment of the population. TAIB is similar to a savings and loan institution and is owned by the government. Its main objectives are to operate/promote Islamic financial services and to raise the socio-economic standards of the population. Between 1992 and 1996, the customer deposit base of TAIB rapidly grew two and a half times from BND118 million to about BND295 million.
