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Tuesday, 2 April 2013

Islamic finance as an economic tool

When I was a young man newly started in the Islamic banking industry, I was asked to join a business trip to Mindanao, the Philippines, sometime in the late 1990s. It was my first major business trip and naturally I was excited. It remained to this day as one of the most memorable, sobering and enriching experiences in my 16-year career.
The purpose of the trip was to explore how Islamic finance could assist in the redevelopment of Southern Philippines.
Early on, I had personally identified that Islamic finance was the natural partner and catalyst to bring about economic and infrastructure development.
It could support the then brokered peace process, after years of guerilla warfare by the majority Muslim locals who were seeking their own rights to govern.
I was also pretty nervous because I thought I was going into a war zone. At least that was what my young, inexperienced mind was concocting despite the assurance from my bosses that there was no danger to life or limb. The things I had to do for Islamic finance!
I spent a gruelling 20 hours travelling to Manila – yes it was 20 hours because I had to fly from Labuan to Kuala Lumpur, slept at the airport overnight on the bench (since I was not qualified to stay in the transit hotel then) and flew off to Manila the next day before taking a flight onwards to Mindanao. This was despite Labuan being located next door to Mindanao! I wished there was a direct flight to Mindanao from Labuan or Kota Kinabalu, but I digress.
The flight to Mindanao gave me the impression of how poorly connected it was from major business routes and how isolated it was from the rest of the world at that time, which highlighted the importance of the trip I was on. When we landed, all the nervousness that I was carrying dissipated and was replaced with a sense of excitement. Being the most junior in the entourage, I naturally had to carry the bags and sort out the logistics.
Everything about the trip was looking up until we reached our car and saw the armed guards that will be escorting us throughout our visit. There were a dozen of them armed to the teeth plus outriders. It brought back all the imagined danger to the fore especially when our host explained it was for our safety and we were not to travel alone without at least two guards escorting us.
Central tool
Since I was already there and didn’t want to be seen like someone really wet behind the ear, I pushed aside my worries and did what was expected of me. Backed by an allocation of funds from various parties including from supranational bodies, we set about to identify viable commercial projects.
We visited the local rebel leaders, local governments and businessmen. We looked at one of the largest fish ports in the world, fish canneries, sugar cane fields and many other potential projects that could be supported by way of Islamic finance.
The whole trip took about a week including the overnight stays in Manila to meet with government officials, that is, senior Philippine legislators keen to see peace in Southern Philippines. I was involved in all of the discussions since I was tasked with note-taking.
Although I did not fully understand everything that transpired in the discussion, the experience made it clear that Islamic finance was a central tool that could ensure lasting peace in Southern Philippines.
Unfortunately, nothing happened after the visit as the peace process envisaged did not materialise. We could not implement what could have been done under Islamic finance to help make it successful.
Many years have passed and I have fairly put aside any hope of seeing Islamic finance playing a role in the redevelopment of Southern Philippines.
That was until the recent announcement on the signing of the Framework Agreement between the Philippine Government and the Moro Islamic Liberation Front (MILF), successfully brokered by Malaysia.
I was excited again at the prospect of Islamic finance catalysing a lasting peace in the area and sat as a keen observer of the new peace process albeit from a distance.
The Lahad Datu incident was unfortunate but it showcased again the need to bring the people in Southern Philippines into the mainstream economic activities. To me, this can be achieved best through Islamic finance. Real peace cannot exist without economic empowerment.
Of course, this can only happen if Islamic finance is fully enabled and facilitated to operate on a level playing field with conventional finance in the Philippines.
In fact, considering that Islamic finance has proven to be the best tool for the democratisation of the financial market to promote a truly inclusive society in countries like Malaysia, I would even go so far as to recommend that special incentives be given to Islamic banks to operate at least in the Southern Philippines so that it can truly serve the peace agenda.
At the end of the day, Islamic finance is a public good and an economic tool created to benefit all mankind. Since this is the case, it should be the most natural tool to be employed for the peace process not just in Southern Philippines but anywhere else in the world.

(F.M.T News / 01 April 2013)

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