THE Department of Budget and Management (DBM) is studying opportunities offered by a Shariah-compliant financing instrument, or sukuk bonds, to fund the Duterte administration’s “Build, Build, Build” (BBB) program.
This was revealed by Budget Secretary Benjamin E. Diokno during the sixth Association of Southeast Asian Nations (Asean) Universities International Conference on Islamic Finance on Wednesday in Makati City. Diokno said that part of the administration’s financing strategy is to continuously diversify the country’s investor base, hinting that sukuk may also be ventured into in the near future.
“The President’s commitment to the Muslim people is not lost on us, his economic managers. One important economic issue that we are looking into is lack of access to Shariah-compliant financial instruments in the market,” Diokno said.
He further emphasized how the BBB infrastructure program will help build the government’s asset base in the future. This asset base, he added, can be further strengthened with the issuance of sukuk bonds.
“This should be exciting news with Islamic Finance being largely collateral-based or asset-backed,” he added.
The Philippines became the first Asean sovereign to issue Panda bonds, or renminbi-denominated bonds this year, which was warmly received by the Chinese and other offshore markets. The country also recently returned to the public Samurai market, for yen-denominated securities, after an eight-year break.
“That still needs study by the DOF [Department of Finance]. I know there’s a bill in the House [of Representatives] that will actually strengthen Amanah’s bank structure. But that would probably take another year,” he said.
In October 2017 Rep. Frederick W. Siao of the Lone District of Iligan City said the rehabilitation of war-torn Marawi City can also be funded through issuance of “Islamic bonds” through the lone Islamic bank, the Al Amanah Islamic Investment Bank of the Philippines (Al Amanah).
Siao said the issuance of a sukuk bond will enable the country to tap funds from the 57 member-countries of the Organisation of Islamic Cooperation.
The lawmaker explained “Sukuk can be compared with government bonds, only that these financial papers do not follow the Western banking concept of riba, or interest.”
“Under Islamic banking, a holder of a sukuk means he or she holds ownership in the investment, and the bank becomes a business partner.”
Sukuk bonds are backed by assets since Islamic shariah rules prohibit Muslims from earning interest from loans.