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Financial Sector Development in Brunei Darussalam: Depth, Access, and Efficiency: A Comparative Analysis

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  • Biswa Nath Bhattacharyay
  • Madhurima Bhattacharyay

Abstract

Financial sector development plays an important role in promoting economic growth and welfare of the citizen of a country. On the other hand, financial sector instability or vulnerability, can adversely affect the economic growth and cause major disruptions in the country. This paper examines the financial sector development of Brunei Darussalam in terms of depth, access and efficiency during 2014-2018 based on 24 indicators. This paper starts with the examination of the role of the financial sector in the economic development and financial sector stability and reviews the major literature in this area. A discussion on the policies and strategies for the financial sector development and its regulator, Brunei Darussalam Central Bank (BDCB) and the structure of the financial sector of Brunei Darussalam are presented. Lastly, the paper discusses the major prospects and challenges faced by the banking sector as well as the recommendations. The analysis of the aforementioned indicators shows that the performance of Brunei Darussalam in terms of access to banks and financial inclusion had been, on an average, significantly better than its most peers among Association of Southeast Asian Nations (ASEAN) and Gulf Cooperation Council (GCC) countries. In terms of depth and intermediation, the country, however, remained lower throughout the study period compared to its most ASEAN and GCC countries. The efficiency of banking sector, on an average, remained at a moderate level with most indicators lower compared to several ASEAN and GCC peers. There is a scope for further financial sector development through enhancing depth and efficiency of the banking sector and the development of efficient bond and stock markets. This could bring significant benefits for Brunei Darussalam including enhanced growth.

Suggested Citation

  • Biswa Nath Bhattacharyay & Madhurima Bhattacharyay, 2022. "Financial Sector Development in Brunei Darussalam: Depth, Access, and Efficiency: A Comparative Analysis," CESifo Working Paper Series 9960, CESifo.
    • Handle: RePEc:ces:ceswps:_9960
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    References listed on IDEAS

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    1. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934, Elsevier.
    2. Adolfo Barajas & Ralph Chami & Seyed Reza Yousefi, 2016. "The Finance and Growth Nexus Re-Examined: Do All Countries Benefit Equally?," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(5), pages 5-38, June.
    3. Nili, Masoud & Rastad, Mahdi, 2007. "Addressing the growth failure of the oil economies: The role of financial development," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(5), pages 726-740, February.
    4. Joshua Aizenman & Yothin Jinjarak & Donghyun Park, 2015. "Financial Development and Output Growth in Developing Asia and Latin America: A Comparative Sectoral Analysis," NBER Working Papers 20917, National Bureau of Economic Research, Inc.
    5. Mr. Tom Gole & Tao Sun, 2013. "Financial Structures and Economic Outcomes: An Empirical Analysis," IMF Working Papers 2013/121, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    banking and financial sector development and indicators; economic growth; financial stability; financial depth; access and efficiency; Brunei Darussalam; ASEAN and GCC countries; fintech companies;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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