Al Amanah Bank faces more obstacles

Al Amanah Islamic Investment Bank of the Philippines, the country’s only Islamic-oriented financial institution, is facing several challenges in its bid to grow as a financial institution.

Among these obstacles include the lack of legal and regulatory framework; oversight of Shariah; technical capacity and pool of practitioners; Shariah-complementary product/service demand in the Philippines; correct perception of Islamic finance; coordination for a globally-accepted legal and regulatory standards.

In a Amanah Islamic Bank brief, it was proposed that the bank seek partnerships with government agencies and the private sector with a know-how on Islamic banking and finance.

That includes exploratory partnership with Tabungg Haji and Zakat Fund.

Tabung Haji, or Lembaga Tabung Haji, is the Malaysian hajj pilgrims fund board. The main headquarters is located at Jalan Tun Razak, Kuala Lumpur. Tabung Haji facilitates savings for the pilgrimage to Makkahthrough investment in Shariah-compliant vehicles.

The Zakat Foundation of America is a Chicago-based, Muslim non-profit dedicated to alleviating the immediate needs of the poorest communities, as well as providing emergency relief, post-disaster rehabilitation, development, education, healthcare, orphan sponsorship, and seasonal programs such as Ramadan Iftars and Udhiya/Qurbani.

It likewise seeks assistance for the establishment of a National Shariah Advisory Council. The body is a prerequisite to the formation of Islamic-oriented financial institution.

The primary market of Amanah Islamic Bank is the six-million Muslim population found primarily in Mindanao, but are likewise scattered throughout the country.However, it has been unable to service the target market due to limitations to its full implementation of the Shariah-compliant financial products. It has also been unable to tap the billions of dollars worth of Shariah-compliant assets globally.

Islamic finance has grown significantly with Sharia-compliant assets of at least $1 trillion. Sukuk bond issuance, Islamic debt and equity papers, grew 50 times from 2001 to 2010 amidst slow global growth in the aftermath of the 2008 global financial crisis.

According to data from the British Embassy, Southeast Asia is seen as a top source of growth. Furthermore, the growth of Islamic finance in the country may play a crucial role in the economic development of Mindanao.

The UK is home to almost every major international bank and financial institution in the world, ranking first in the March 2011 Global Financial Centers Index (GFCI) survey. It is by far the most successful non-Islamic country in Islamic banking, with 22 banks offering Sharia-compliant financial instruments.

There are 34 Islamic funds managed from the UK, and 31 Sukuk issues raising $19 billion listed on the London Stock Exchange.                          

http://www.philstar.com

Islamic banking crucial to trade

ISLAMIC banking may play a vital role in Asean trading, especially for the Philippines, which has good business relationship with Indonesia and Malaysia, according to British Ambassador Stephen Lillie

Islamic banking is a system that is based on the principles of Islamic law, also known as Shariah, and guided by Islamic economics.

Two basic principles behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest.

Since this system of banking is grounded on Islamic principles, all the undertakings of the banks follow Islamic morals. Therefore, investments involving alcohol, gambling, pork, etc. are prohibited.

Lillie said if the country wants to attract more investments, Islamic finance should be developed.

"The Philippines has a web of trade and investment and people to people links with the Middle East," Lillie said.

He added that as the country seeks for areas to capitalize on and expand these links, Islamic financial instruments may have a valuable role to play.

"Indeed as you seek to attract much needed foreign investment from a wide range of sources, (the Islamic links) would be crucial," Lillie said.

Lillie added diversifying and innovating investment products are also key to good trading systems.

In particular, he pointed out that Islamic finance is relative to the country because of the Muslim community which comprises about 8 percent of the population, bigger than other European countries.

The Muslim community in United Kingdom accounts for only 3 percent of its population.

Globally, Islamic finance has been growing at a rate of 20-25 percent in the past five years, according to Noel Bonoan, COO and vice-chair of Manabat Sanagustin & Co., CPAs, a Philippine partnership and a member of the KPMG network of independent member firms affiliated with KPMG International Cooperative.

"Islamic finance is increasingly emerging as a viable alternative to conventional finance and has significantly grown in popularity," Bonoan said.

He likewise pointed out that the lack of legislative and regulatory infrastructure in the Islamic finance market significantly adds to the cost and complexity of Shariah-compliant operations.

Idiosa Ursolino, senior vice president of the Al Amanah Islamic Bank of the Philippines, pointed out the challenges that stymie the development and expansion of Islamic finance institutions in the country.

One of these is the lack of Shariah advisers in the field of economics, banking and finance.

In the Philippines, the role of an Islamic finance institution is to provide developmental projects in the country, said Samira Gutoc, Al-Amanah director.

"One of our developmental projects is the improvement of the tuna industry in General Santos City," Gutoc said.

To date, there exists only one bank engaged in Islamic finance, the Al-Amanah Islamic Investment Bank, a subsidiary of the Development Bank of the Philippines.

It has been in existence for about 40 years and had to be taken over by the DBP, which infused P1 billion of fresh capital.

Amanah Bank started with a small capital of P50 million.

"In recent years Islamic finance has become one of the fastest-growing areas in financial markets. It is estimated that there are approximately $1 trillion worth of Shariah-compliant assets globally. Islamic finance as a global industry has seen a compounded annual growth rate of over 25 percent from 2006 to 2009 and market observers expect continued growth at an annual rate of 15-20 percent as the number of Islamic finance providers and investors increase," said Leah De Leon, undersecretary of the Department of Finance.

She also pointed out that in 2011, the Sukuk, Islamic financial certificates or bonds, became one of the drivers of growth for the Islamic financial system.

Sukuk issuance continues to grow at a rapid rate.

Data shows that the amount of outstanding Sukuks rose to $177 billion as of November 2011 from $143 billion as at end 2010.

http://www.malaya.com.ph 

Islamic banking in the Philippines

Not many of us are aware that there is such a concept as Islamic banking, and that there is actually a special bank for our Muslim brothers and sisters.

In a country like the Philippines where there is a significant Muslim population, this financial system is indeed very important.

Islamic banking pertains to a system of banking that is consistent with the principles of Sharia (Islamic law). In this type of banking system, the collection and payment of interest, which Muslims refer to as “riba,” is strictly prohibited.

Islam forbids transactions involving interest because of its teachings that all income must be determined by the supply of work associated with the factors of production.

It emphasizes that if money is lent for interest, capital is consequently augmented without any effort. Profit-Loss sharing in Islam encourages Muslims to invest their money and become partners in order to share the profits and risks of the business.

Islamic law prohibits investing in sectors contrary to Islamic values such as gambling, alcohol, tobacco, the arms industry and pornography.

In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller and resell it to the buyer at a profit, while allowing the buyer to pay the bank in installments.

The Philippines actually pioneered in Islamic banking with the creation of the Al-Amanah Islamic Investment Bank of the Philippines in 1973. Al-Amanah even antedated the establishment of the Dubai Islamic Bank in 1975.

However, for a variety of reasons, principally lack of expertise in this new field and lack of general public awareness, Al-Amanah failed to really take off the ground.

In the 1980s, the Government of Malaysia and Bank Negara began actively promoting Islamic banking in Malaysia. The following decade saw the development of a regulatory regime for Islamic Financial Institutions by the Central Bank of Bahrain.

Financial institutions and products designed to comply with the central tenets of Sharia are among the fastest growing segments of the global financial industry. The number of Islamic financial institutions worldwide now exceeds three hundred, with operations in 75 countries and assets in excess of US$400 billion.

Islamic banking has also been estimated to be growing by as much as 20% a year, largely fuelled by wealth from oil.

With these developments, interest in Islamic banking has been rekindled. With Monetary Board approval, the Development Bank of the Philippines recently obtained full control of Al-Amanah Islamic Investment Bank by acquiring the national government’s 69 percent stake in the bank.

Forward-looking DBP President Rey David sees in Al-Amanah a new opportunity for DBP to expand its SME operations in Mindanao as well as other banking services to include remittances especially from the Middle East.

DBP has already sent 15 top executives to Malaysia to hone up their skills in Sharia banking.

Rey David believes that under new management, the refurbished and rebranded Al-Amanah could serve as gateway to Brunei, Indonesia, Malaysia and to the economies of other Muslim countries.

Link: http://www.mb.com.ph/articles/245575/islamic-banking-philippines