Brunei Islamic Finance Has Potential To Go Global

Bandar Seri Begawan - The growth of Islamic finance products and the benefits they bring to Brunei will increase rapidly if new innovative products can be created, and the country also has the potential to market itself internationally in this regard.

Dr M Ishaq Bhatti, Associate Professor of La Trobe University Melbourne, Australia, said this in an interview with the Bulletin following the launch of the first FBEPS-AGBEP PhD Colloquium at Universiti Brunei Darussalam.

Speaking on Brunei's international marketing prospects via Islamic finance, he said, "Yes, there is a bright chance, because Brunei can set up a retail bank in Australia.

"At the moment Australia has wholesale Islamic finance," he explained. "There is a need for a retail Islamic bank - there is a high demand, so Brunei can be the first, and particularly in a Muslim majority area, they can wipe up the market."

Dr Bhatti said that the reason Islamic finance has not only survived but thrived in the global financial crisis is that it gives "backup with real, tangible assets".

He explained that it reduces the risk of making financial institutions collapse, and hence provides reassurance to investors, as the investments they make are backed up with tangible assets.

"That's why while everywhere else things are looking down, people are investing with Islamic finance and the reason is that there is a real asset attached to it."

Another reason is that Islamic finance bans short selling.

"Most of these financially troubled firms have been doing short selling and unethical investments that are of high risk," he said. "Islamic finance does not invest in unethical investment areas, rather it invests in ethical investment areas and hence it has limited and decreased risk of bringing down financial institutions, and hence, (provides) high returns during a financial crisis.

"Whenever there is a crisis, Islamic finance gives you a better return than conventional finance," he added.

"That's why everybody's trying to jump into this boat to invest, including western countries and Muslim countries as well."

Asked what he sees next for Islamic finance, he said, "Currently the size of the Islamic finance industry is equivalent to the Australian finance industry, or the Australian investment industry, which is 1.6 trillion dollars, and this is increasing exponentially with an average growth of more than 10 per cent."

He said that he sees this trend continuing, but added, however, that there has been a little bit of a slowdown in growth due to the financial crisis, as a result of causality effect, adding that as Islamic finance is a subset of conventional finance, it fits very well in the conventional finance portfolio.

Dr Bhatti set up the Islamic Banking and Finance Programme at La Trobe University, which is the first-ever in the Australasian region.

"Soon after the global financial crisis, we realised the need of such education in Australia, to educate our financial industry, to educate the government bodies and to educate the academicians on the difference between Islamic and conventional finance. So in 2008, we set up curriculum soon after we saw the crisis," he explained.

He mentioned that a number of events followed, including the largest-ever Islamic finance symposium in Australia, which he said garnered a lot of attention from the media, bankers, financial institutions and insurers.

The Associate Professor also highlighted that Islamic finance has a product called Qard e-Hasana for interest free loans for people who are poor.

"We recently set up interest-free loans in Australia, and we are getting amazing benefits out of it," he said. "We set up Zakat Australia last Ramadhan, and we can see amazing benefits.

"Students who could not pay fees or rent, they came up for Zakat, and those students who need money to buy a laptop or a refrigerator, for example, they can opt for Qard e-Hasana," he explained. "We just started this, and while Australia is a Muslim minority country, and we can offer this Zakat and Qard e-Hasana to non-Muslims as well."

Speaking on Brunei, Dr Bhatti said that as Brunei is an Islamic country, the growth of Islamic finance products will increase rapidly if new innovative products can be created.

Asked for examples, he said, "Like schools and building infrastructure for Brunei. Short-term, long-term liquidity products and particularly Islamic funds, Islamic mutual funds," he said.

Dr Bhatti also mentioned Sukuk, saying that it can give an average market return and that it's both Syariah compliant and is low risk.

"Insurance is another issue - Takafuls," he continued. "The people want to have health insurance, so there should be a compliant health insurance in Brunei. Everybody wants health insurance, but they want it to be Syariah compliant.

"They want it by Halal means," he added. "Bonds, Takaful, home loans, car loans - all by Halal means and easy instalments.

"I'm very happy to have met the Dean of FBEPS (Dr Hazri Kifle) and the Vice Chancellor of UBD (Dato Paduka Dr Hj Zulkarnain bin Hj Hanafi)," he said. "They are very enthusiastic, and by bringing me here it shows that they are very keen to contribute into this emerging area."

He said that, as a result, his keynote speech on Islamic finance at the colloquium would lay down more innovative ways of approaching Islamic finance for the PhD students.

"They are going to contribute to UBD, as well as to the Brunei financial structure, so I feel that Islamic finance has a mega effect on Brunei," he explained.

"Being at La Trobe University, I would love to have a chair in Islamic finance between UBD and La Trobe, which will strengthen the relationship between our two countries."

He added that he will also be coming back here next month on an exchange programme, under Royal Brunei Airlines' sponsorship, between La Trobe University and UBD.

"We are bringing a few students from Australia to visit Islamic banks here in Brunei."

--Courtesy of Borneo Bulletin


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