Bank Islam Brunei Darussalam Berhad Initiates Brave New Islamic Finance Project

Bank Islam Brunei Darussalam Berhad Initiates Brave New Islamic Finance Project

Bank Islam Brunei Darussalam Berhad launched a brand new innovative Islamic Structured product yesterday with the aim of providing potential investors exposure to international stocks while providing them with principal protection and returns that are compliant with Islamic Law.

In an interview with the Weekend, Zulhazransa Hj Emran Economic Research, Asset & Fund Management of Bank Islam Brunei Darussalam spoke on the product itself The BIBD principal protected investment (PPI) is a three-year medium term investment that uses the Sharia concepts of Mudharaba to generate returns and Murabaha to provide the principal protection feature. “This investment product is actually different to what we previously have introduced and the difference is the fact it provides exposure to international stocks. As I mentioned it is a structured investment product that gives the possibility of potential higher returns. “Unlike previous projects the keyword is potential,” he said.

The potential return is referred to the performance of a basket of four international telecom and technology stocks which are Nokia, Samsung electronics, vodafone and SAP from Germany.

Based on historical data and back testing this product has been able to generate an average return of 4.5 per cent returns. They are referred to the performance of the basket of stocks where the potential dividend of 2.25 per cent may be paid to investors each six months provided the performance of the stocks, on the six monthly observation dates, achieve a certain set of predetermined criteria and subject to investors holding it to maturity.

Investors’ initial investment however is protected at maturity even if the stocks do not achieve the set criteria for the six monthly dividend payments. This product is suitable for both individual and institutional investors who have the appetite to invest in global stocks to gain higher returns as compared to normal deposit products but are not willing to lose their initial investment.

As this is a structured investment product, potential investors are advised to fully understand and familiarise themselves with the contents, terms and conditions and the risk associated with any structured product. Further details can be obtained at any of the Bank’s branches or call 223800 & 2235745.

Applications, on the other hand, can be made at all BIBD branches. The investment product will be offered on a “first come first served” basis where subscriptions can be made during the offer period beginning on December 17, 2007 until January 17, 2008.

“It is open for all ages 18 above. Even someone from overseas can participate but would have to maintain an account with BIBD. We don’t charge an application fee and annual management fee,” he said.

Halal Financial Products In Demand In Brunei

Halal Financial Products In Demand In Brunei

Bruneians have clearly shown a healthy appetite for Islamic investment products as can be gleaned from the recent issuance of sukuk or Islamic bonds, which generated strong demand from buyers, a banking expert at Universiti Brunei Darussalam said yesterday.

More and more Bruneians are gaining confidence in investing their money in Syariah-compliant financial products such as sukuk, said Hjh Salma Latiff, director of the Centre for Islamic Banking Finance and Management (CIBFM).

Although sukuk are generally not capital-secured, many favour them due to their tradeable feature in the secondary market and the fact that they offer investors an entitlement to any profits made. Also, due to certain caps in the market allowed by the Syariah law for investments, Islamic investments are not as volatile as conventional investments, she added.

Sukuk issuances by the government and Islamic financial institutions in Brunei have been received very well by the general public, said Hjh Salma.

“The recent issuance of government sukuk was oversubscribed,” she told The Brunei Times, citing the sultanate’s healthy appetite for Islamic investment products.

“This is probably why most conventional banks are expressing interest to venture into sukuk,” she explained, adding that Brunei is indeed capable of becoming host to more Islamic financial institutions as – it already has the infrastructure in place. “All the acts are already in place,” Hjh Salma said.

However, the Ministry of Finance is currently revising the guidelines on the establishment of Islamic banks in Brunei. The ministry is reviewing the existing Syariah law which governs the area of banking. Although it remains unclear when the order would be finalised, the CIBFM director is upbeat that this will encourage the entry of more Islamic financial institutions which in turn would provide local consumers with more Syariah-compliant investment products.

Already, the Hong Kong and Shanghai Banking Corporation (HSBC) and Standard Chartered Bank have expressed interest in establishing a separate Syariah-compliant banking operations once the Islamic Banking Order `has been finalised.

In an earlier interview with The Brunei Times, Tareq Muhmood, HSBC CEO lauded the review as it will act as a catalyst to attract more Islamic financial institutions.

“Once it’s approved we’ll look into whether to apply for an Islamic banking licence… It’ll definitely attract more competition (in the local Islamic banking environment), which is good,” he said.

In general, Islamic banking in accordance with the Syariah law is permitted to trade and invest in halal (acceptable by Islam) markets and must strictly shy away from prohibited matters (haram). Hence, investing in areas related to alcohol and gambling is forbidden. Unlike conventional banking, Syariah law prohibits interest charges or funds which are termed as riba.