The Philippines is turning to Islamic finance to rejuvenate Bangsamoro, a Muslim-majority region whose economy has been stifled by decades of civil war.
The Bangko Sentral has set up a task force with the World Bank and the country’s only Shariah-compliant lender to develop the industry, Governor Amando Tetangco said Oct. 29 in Manila. Bangsamoro is an autonomous region set to be created on the southern island of Mindanao after President Benigno Aquino signed a peace agreement with Muslim rebels.
The Philippines said in July it planned to sell sovereign sukuk by mid-2016, following the UK and Hong Kong in creating a local benchmark for a global industry whose assets are forecast by the Malaysia International Islamic Finance Centre to more than triple to $6.5 trillion by 2020. The Bangsamoro Development Agency says it needs P110 billion ($2.4 billion) to rebuild a region that has a poverty rate more than double the national average.
“The Islamic banking industry may be a catalyst for the economic growth of the people of the Bangsamoro region,” Megat Hizaini Hassan, head of the Islamic finance practice at law firm Lee Hishammuddin Allen & Gledhill in Kuala Lumpur, said in an interview.
“It may also be useful for the regulators in the Philippines to consider Islamic finance not just for Mindanao, but rather as a means of bringing in foreign investment,” he said.
The Philippines, which considered a law to support Islamic finance as far back as 1973, may amend the charter of Al-Amanah Islamic Investment Bank of the Philippines to allow other Shariah-compliant lenders, the central bank’s Tetangco said.
“The idea is to allow Islamic banks to co-exist with conventional banks and have a level playing field,” he said. “We’re working as fast as we can,” he said, adding that the measures would require congressional approval.
The Bangsamoro government is also waiting on legislative approval to be formally established after President Aquino submitted a bill to this effect on Sept. 10.
The Philippines signed a peace deal with the Moro Islamic Liberation Front in March to end a four-decade insurgency in Mindanao, home to most of the country’s 5 million Muslims. The pact also seeks to unlock investment in the mineral-rich south.
Bangsamoro supercedes the failed Autonomous Region in Muslim Mindanao, an entity created in 1989 during a previous attempt at peace. Some 49 percent of people in that area lived on less than $1.20 a day in 2012, compared with the national average of 20 percent. Aquino attended a two-day forum that ends today in Mindanao’s Davao City aimed at seeking international aid and investment for Bangsamoro.
“There is a dire need for financial services to support economic development in the Mindanao area,” Idiosa Ursolino, senior vice president at Al-Amanah Islamic Investment Bank in Manila, said in a Nov. 4 e-mail interview. “That could be made possible by a culturally-friendly business environment like the Shariah-compliant business opportunities.”