Interest free Banking and Finance in Brunei Darussalam

Abstract

Brunei is among the few countries vigorously pursuing interest-free banking. Looking at its status, there is no doubt that Islamic banking and finance remains a governmental project in Brunei. This paper examines the development and progress of this institution in Brunei highlighting the present experiences, future prospects, and imminent expectations. Islamic banking and finance has ushered in a new economic order in the country. Although the system is still in its primary stages of development, it has been successful. Indeed, it has good prospects due to political will and cooperation. Political will is fundamental to the fruitful implementation of a new economic order and efficient Islamization in Brunei has facilitated the establishment of sound socio-cultural and economic foundations vigorously promoting the essential values of Islam. Nonetheless, the ‗call‘ for economic diversification has some implications for interest-free banking institutions in the country because diversification invariably exposes an economy to international interests and more importantly, empowers the private sector. These bring forth the likelihood of promoting interest-based banking and financial practices. We, therefore, conclude that Islamic banking has been very successful in Brunei but it still remains vulnerable to non-political future challenges subject mainly to the economic fortunes and prospects of the petro-dollar.

Keywords

• Brunei
• Islamic banking
• ribā
• economy
• economics
• petro-dollar