Enabling Legal Environment of Islamic Finance and Social Finance in Brunei Darussalam: A Demand for Improvement

Enabling Legal Environment of Islamic Finance and Social Finance in Brunei Darussalam: A Demand for Improvement

Hakimah Yaacob (Universiti Islam Sultan Sharif Ali, Brunei), Adli Yaacob (International Islamic University Malaysia, Malaysia), Khairul Hidayatullah Basir (Universiti Islam Sultan Sharif Ali, Brunei) and Qaisar Ali (Universiti Islam Sultan Sharif Ali, Brunei)
Copyright: © 2021 |Pages: 10
DOI: 10.4018/978-1-7998-3452-6.ch013

Abstract

According to ICD Thomson Reuters Islamic Finance Development Indicator 2014, Brunei Darussalam ranked 10th out of 92 countries that practise Islamic Finance. This makes Brunei well-placed to grow an international role in the investment management of Islamic products, and in the provision of takaful. Wawasan 2035 envisages that, by 2035, Brunei has projected that the contribution of the financial sectors including Islamic Finance to GDP will have expanded to 8% of GDP. However, there is lacuna of enabling a legal environment that hinders the growth of Islamic finance. The objective of the chapter is to analyse the legal impasse that hinders the growth of Islamic finance from legal perspectives. Despite strong support from the High Majesty, Brunei has taken a moderate move in the importance of creating legal enabling environment as a pathway for economic diversification by 2035. This chapter adopts library research with reference to the acts, and cases reported. This chapter concludes with suggestions for the authority's consideration and policy research.
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Currently, the activities of Islamic banking and Takaful are regulated by the Central Bank of Brunei by virtue of the Autoriti Monetari Brunei Darussalam 2010. Islamic banking activities are supervised by the Islamic Banking Order 2008. The provisions, however, are non-comprehensive to cover a whole plot of the related financial activities. They have defined the HukumSyara’ to cater to the Shariah references. The HukumSyara’ is defined as the acceptance of four recognised mazahibs, and no acceptance to other schools of thought is allowed. However, the definitive application is uncertain. Leveraging on definitions of HukumSyara’ per se is not a solution to the whole financial system. The Act should work beyond Shariah mazahibs. This paper submits that leading with a mere mazahib as guidance to Shariah pronouncement is not an answer to the financial situations and issues that we are currently facing. The enabling environment should not be read within this context only and not work in a vacuum. It has to go beyond administrative outlook. In addition, the pronouncement losing characters of strengthening Shariah in the country. One of the factors is due to the judiciary system that leverages on the civil courts and not Shariah. By having this leveraging, the courts are unable to appreciate the mazahibs’ differences and what more on the Shariah contract.

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