The national government must come up with an Islamic financial framework especially with the implementation of the Bangsamoro Organic Law in areas that will be placed under the Bangsamoro Autonomous Region in Muslim Mindanao, a top official of a financial institution said over the weekend.
At the signing of a memorandum of understanding that will make her bank the financial advisor of the Mindanao Development Authority (MinDA), Cecilia C. Borromeo, president and chief executive officer of the Development Bank of the Philippines (DBP), said that Islamic banking framework is important because there are global institutions that are willing to invest in Al-Amanah Islamic Investment in the Philippines, a wholly-owned subsidiary of DBP.
She said the absence of the framework has become a major challenge for Al-Amanah especially in expanding its reach to Bangsamoro areas in Mindanao.
“Hopefully the legislators in this part of the country (Mindanao) will pursue an Islamic banking framework of the Philippines so that we can optimize the opportunities that are made available to Al-Amanah,” said Borromeo, pointing out that there were attempts to come up with a framework for Islamic banking but nothing has been heard about it.
One major difference between Islamic banking and regular banking systems is the non-implementation of interest rates for Islamic institutions. What the bank gets is part of the equity of the borrower.
She even added that “the entire board (of directors)” of the DBP, if allowed by the Department of Finance, “is willing to give the Al-Amanah (Islamic Investment) Bank (of the Philippines) as its contribution to the Bangsamoro.”
Established in 1973 to help fund projects in conflict-affected areas in Mindanao that were predominantly Moro populated, 99.9% shares of Al-Amanah was acquired by DBP in 2008 by taking over the shares of the national government, pension authorities Social Security System and Government Service and Insurance System.
The Mindanao Development Authority (MinDA) is pushing for the creation of the Islamic framework as it is looking into the possibility of tapping international Islamic financing institutions for projects Mindanao, said Romeo M. Montenegro, Mindanao deputy executive director.
“We have been pushing for the establishment of `Sukuk’ fund mechanism as this will allow to come and fund key projects in the Bangsamoro Autonomous Region in Muslim Mindanao,” Montenegro told the TIMES, adding that at present, the agency has been aggressively discussing the issue with the economic managers of the government.
Although similar to regular bonds, Sukuk bonds comply with Islamic regulations particularly the ban on interest rates.
On the part of the DBP, it has also started lending, albeit on small amounts using the Islamic system.
One of these small portfolios was the P5 million that it lent to the Mothers for Peace, a group of women advocating peace and is helping women in Marawi City to recover from the destruction brought about by war last year, said Maria Lourdes A. Arcenas, director of the bank.
Arcenas explained that while the Mothers for Peace borrowed from the bank in a conventional way, it is lending to the Maranaw women … Shari’ah (Islamic way).”
At present, the portfolio has about 300 borrowers and that the system has worked.
