AL AMANAH Islamic Investment Bank of the Philippines (AIB), a subsidiary of the Development Bank of the Philippines (DBP), will play a vital role in the rehabilitation of war-torn Marawi City and the development of the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM).
During the recent celebration of its 46th anniversary, AIB Chairman and Chief Executive Officer Alex P. Bangcola said the bank launched its General Islamic Investment Account (GIIA) and Trust Waqf Fund (TWF). Gracing the launch, Chief Minister Al-Hajj Murad Ebrahim of the BARMM pledged to support the bank. Moreover, Murad was impressed with the potentials of the bank and said it can be a valuable partner of BARMM in its pursuit of economic development, according to Bangcola.
Being the country’s only Islamic bank, AIB will serve as the government’s arm in ensuring poverty alleviation, especially in Muslim Filipino communities across the country, by delivering them the goodwill and simplistic Islamic banking and financing that are responsive, sensitive and suitable to their way of life. Moreover, Bangcola said AIB is mandated to provide Muslim Filipinos with Islamic banking and financial education that can help them improve their economic condition and make them a significant economic force of the nation.
“According to the Bangsamoro Organic law (BOL), BARMM can invest in AIB,” Bangcola said.
Aside from providing loans for development projects, Bangcola said AIB has provided loans for microfinancing in Marawi, particularly for the internally displaced persons (IDPs) from the Marawi siege. It has reopened its Marawi branch to serve the growing clientele for micro, small and medium enterprises (MSMEs).
Islamic banking
Islamic banking, also known as non-interest banking, is a system based on the principles of Islamic or Shari’ah law and guided by Islamic economics. Unlike conventional banking that earns profits from interests of the loans granted, Islamic banks earn profit through equity participation, which Islamic rules on transactions are called Fiqh al-Muamalat.
Typically, financial transactions within Islamic banking are a culturally distinct form of ethical investing. It does not allow investments in alcohol, gambling, pork, and other forbidden items.
When Islamic bankers need more data and information, they tap learned scholars to verify some details on Islamic banking to ensure they would not deviate from the principles of the Quran and Islamic banking.
Islamic banking is quite different from conventional banks, according to Bangcola. Unlike conventional banks that make money by charging interest from their loans, Islamic banks share the profits with the borrower, in an exercise that is done on a negotiated basis. Meanwhile, Bangcola said AIB also shares in the loss of a business. For example, conventional banking requires collateral from the borrower, and the bank typically acquires the collateral if the borrower fails to settle the financial obligation.
In Islamic banking, however, it is very rare that a borrower is required to provide collateral. “We share in the loss and the profit. In Islamic banking, a borrower is a partner and not a lender,” he said.
Furthermore, Islamic banking also discourages the practice of riba, a concept in Islam that discourages nefarious activities when conducting business and trade under Islamic law.
Bangcola said AIB will soon liaise with the Saudi Arabia-based Islamic Development Bank for possible partnership in development projects in Mindanao and the BARMM. The Islamic Development Bank is the World Bank counterpart of the Islamic community in the world. Members include all the Arab oil-producing countries plus Malaysia, Brunei and Indonesia.
“We could access the credit facilities of the financial institution. Currently, AIB is sorting the properties in the province,” Bangcola said. He said AIB is also going to be active in the rehabilitation of Marawi.
AIB plans to expand the Marawi Resort Hotel, the only hotel in the province and co-owned by AIB. It also plans to engage in other projects in Marawi, such as renewable energy and road development, among others. There is also the UN Habitat housing and livelihood project worth P300 million. As a lender, AIB is also involved in microfinancing in Marawi and other parts of Mindanao.
Moreover, the bank also “provides assistance to lenders on how to manage their finances,” AIB special assistant to the chairman and CEO Sarima M. Punguinagina said. “Actually we are doing that in the Marawi branch. We assist them on how to avail themselves of our loans. As I’ve said earlier, it was very successful and it is still ongoing,” she said.
AIB started the two-year microfinancing program in all their branches—Cotabato, Zamboanga, General Santos, Cagayan de Oro and Davao, and even in Greenhills. “Actually, Islamic financing is not exclusive to Muslims as even non-Muslims can also avail themselves of the services of Islamic financing if the individual is living in a Muslim area. In fact, a big chunk of our budget was availed of by non-Muslims,” she said.
Right now, she said, “we’re working on something in the BARMM because there are clients interested.” They reached out to a client in Port of Polloc that plans to put up a yellow corn facility in the area.
“We have some clients in Zamboanga who are engaged in seaweed farming and some big projects in Tawi-Tawi. Islamic Development could be a possible funder for the project,” she said.
To seek potential investors in infrastructure projects in Mindanao, AIB will put up roadshows this year in Brunei, Dubai and Qatar. AIB will present the projects to potential funders. “We brought project proponents to the tours.”
The projects will cost at least P1 billion.
Right now, AIB has a total of nine branches in the Philippines, and Bangcola believes it is a good number. “We plan to open more branches as soon as the need arises.”
Meanwhile, the Bangko Sentral ng Pilipinas (BSP) is still waiting for feedback from various sectors for the Shari’ah Governance Framework and the licensing of Islamic banks.
One of the most important components of the Shari’ah Governance Framework includes requiring Islamic banks to establish an effective board of directors (BOD) and management oversight over their Shari’ah compliance.
“The BOD shall be ultimately responsible and accountable for ensuring full conformity of the Islamic bank or Islamic banking unit with the Shari’ah principles. The BOD needs to be fully cognizant of the risk of Shari’ah noncompliance and its potential implications on the reputation and business of the Islamic bank or Islamic banking unit,” the BSP said.
Image credits: AP/Aaron Favila, Lyndon Joson/Corporate Affairs Department, DBP