Frequently asked questions

Introduction to Islamic finance Technical

What is Islamic Finance?

It is a financial system that complies with Syariah principles.

What are the major prohibitions in Islamic Finance?

There are 3 major prohibitions in Islamic Finance. These are, but not limited to:

  • Interest
  • Uncertainty
  • Gambling

Is Islamic finance for Muslims only?

No, it is for everyone.

What are the categories of Islamic Finance contracts?

Islamic Finance/Contracts

Sale-based

Murabahah
Tawarruq

Safekeeping

Wadi'ah

Leasing

Al-Ijarah
Al-Ijarah Muntahiya Bittamlik
Al-Ijarah Thumma Al-Bai’

Agency

Wakalah

Partnership

Mudarabah
Musyarakah

Why is interest (riba) prohibited in Islam?

Interest (riba) refers to any guaranteed interest on loans or deposits which results in injustice to the borrower, or sometimes to the lender, when real interest rates are negative, both lender and debtor are subject to exploitation.

Riba is defined as any increment without justification of equal countervalue in the exchange of property for property. (Source: ISRA Research Management Centre (2023), Islamic Financial Systems: Principles and Operations 3rd Editions)

The Quran says: “Those who consume interest(riba) cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns [to dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein.”- Al-Baqarah:275

How does Islamic Finance promote ethical investment?

Islamic finance promotes ethical investment by avoiding interest (riba), harmful industries, and excessive speculation.

How is Islamic finance different from conventional finance?

Islamic finance is different from conventional finance because it prohibits interest (riba), avoids harmful industries, and It also promotes risk-sharing and fairness.

How does an Islamic savings account work?

An Islamic savings account does not pay interest. Instead, the bank invests your money in halal activities and shares the profit with you (Mudarabah) or may give a small gift (hibah) your savings are used ethically and in line with shariah principles.

An Islamic savings account will be invested in Syariah-compliant investment. Subject to the Syariah concept being applied, customer will received the dividends.  

What is sukuk?

Sukuk are Islamic bonds. Sukuk represents ownership in an asset or project. The returns to investor and derived from the profits generated by the underlying asset, rather than from the interest payments. Brunei has actively used sukuk as a tool for government financing and capital market development.

Sukuk are certificates of equal value representing undivided ownership of tangible assets, usufruct and services or (in the ownership of) the assets of particular projects or special investment activity.

Source: AAOIFI Shariah Standard (17) Sukuk. 

What is takaful and how is it different from conventional insurance?

Takaful is the Islamic equivalent of insurance. It is based on the principle of mutual assistance and cooperation, where participants contribute to common fund. In the event of a loss, a portion of the fund is used to compensate the affected participants. Unlike conventional insurance, Takaful is free from riba, gharar, and investments in the prohibited industries.

Takaful means a scheme in accordance to Hukum Syara’ based on brotherhood, solidarity and mutual assistance which provides for mutual financial aid and assistance to the participants mutually agree to contribute for this purpose.

Source: Takaful Order, 2008 

What is the first Islamic Financial Institution in Brunei Darussalam?

Perbadanan Tabung Amanah Islam Brunei (TAIB) 

How do Islamic finance institutions generate profit without interest (riba)?

They rely on trade-based and asset-based contracts instead of conventional interest. These include profit-sharing and leasing structures. Gains are derived from business activities, not interest payments 

What is the regulatory and governance structure for Islamic finance in Brunei Darussalam? What are Syariah governance structure in Brunei Darussalam?

  • Syariah Financial Supervisory Board (SFSB): A centralized Syariah board established pursuant to SFSB Act (Cap 295). SFSB is the authority for the ascertainment of Islamic law for the purpose of Islamic banking business, Islamic financial business, Islamic development financial business and any other business which is based on Syariah principles being supervised and regulated by BDCB.
  • Syariah Advisory Body (SAB): Every IFI shall establish their own SAB which responsible to advise the operation of IFIs does not involve any element which is contrary to Hukum Syara’.

What types of Islamic financial institutions are there in Brunei Darussalam?

Brunei Darussalam has: 

  • Islamic banks 

  • Islamic fund 

  • Takaful operators 

  • Islamic capital market services 

What is Brunei Darussalam’s goal for Islamic finance?

Brunei Darussalam to become an international Islamic finance hub, supporting its Wawasan 2035 (vision 2035) by diversifying the economy and promoting Shariah-compliant financial services globally.