Interest-Free Banking and Finance in Brunei Darussalam: Present Realities and Future Prospects

Abstract

Brunei is vigorously pursuing interest-free banking as a governmental project. This study examines the development of this institution in the country highlighting the present experiences, future prospects, and imminent expectations. Islamic banking and finance has superintended a new economic order in Brunei. Although the system is still at its primary stages, it has been successful and holds good prospects due to political cooperation. Political-will is basic to the fruitful implementation of a new economic order and the efficient Islamization process in Brunei facilitated the establishment of sound socio-cultural and economic foundations. This has vigorously promoted the essential values of Islam. Nonetheless, the ‘call’ for economic diversification has some implications for this institution in the country because diversification invariably exposes an economy to international interest and, more importantly, empowers the private sector. These come with the likelihood for promoting interest-based banking and financial practices. This study, therefore, concludes 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 of the petro-dollar.