Islamic Banking and Finance: Fundamentals and Contemporary Issues

Hajjah Salma

0%

10%

20%

30%

40%

50%

60%

70%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

%amt

dueto fr

out.

ROE -IBB

0.00%

5.00%

10.00%

15.00%

1997 1998 1999 2000 2001

ROE-IDBB

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

1997 1998 1999 2000 2001

as a group shrank slightly by 12 per cent. A plausible reason is IDBB’s
conversion to Islamic bank in 2000. However, we must be again reminded
that the above figures, which are derived from Government Statistics,
excludes TAIB, which, in fact, if included, will raise the figures for Islamic
banks even higher than what is shown above.

However, although total supply of funds is growing, a large proportion of
the funds are parked outside of Brunei, in overseas banks (see Diagram 11).
This may indicates either lack of lucrative local investments or the more
attractive investment rates offered by banks outside Brunei or both. Most
banks in Brunei parked their overnight surplus funds in neighbouring country
Singapore to gain from interest given for overnight deposits.

5.5 Profitability Ratio – Return on Equity (ROE)

Source: IBB, compiled from Annual Reports Source: IDBB, compiled from Annual Reports

Source: Brunei Currency Board, Financial Institution Division, Ministry of Finance.

Diagram 11: Percentage of Amount due from Banks Outside over Total

Assets from 1991 to 2001.

Diagram 12: ROE of IBB and IDBB