Manila: A peace plan, a lifting of foreign ownership limits and the drafting of new Islamic banking rules in the Philippines could help breathe new life into one of the world’s oldest Islamic finance institutions.
Since 1974, Makati-based Al Amanah Islamic Investment Bank has been the only lender in the country offering financial products that obey religious principles such as a ban on interest and gambling.
But while Islamic banks around the globe enjoy rapid growth rates and bumper profits, Al Amanah has failed to post a profit for years, and was ultimately forced to offer conventional banking products just to keep afloat.
The case of Al Amanah highlights the challenges that Muslim minorities face in accessing interest-free banking services outside of Islamic banking’s core centres in the Middle East and Southeast Asia. Lacking scale and Islamic banking expertise have meant Al Amanah has struggled despite a five-year rehabilitation plan started in 2009 by its parent, the Development Bank of the Philippines (DBP).
In 2012, Al Amanah posted a loss of P30.6m, although it was an improvement from 2008 when it posted a loss of P124.3m.
This could change as a landmark peace deal between the Philippine government and Muslim rebels helps revive the country’s south, after a 40-year conflict that displaced two million and stunted economic growth.
The agreement, brokered by the Malaysian government, will give the Muslim-majority region known as Mindanao wider powers to control their economy and culture. In line with the agreement, the central bank is preparing dedicated Islamic banking rules.
Earlier this month, the government allowed foreign banks to take full control of local lenders, replacing a cap of 60 percent on foreign ownership.
All these factors are rekindling interest from potential buyers for Al Amanah, said Francis Nicolas Chua, officer in charge of investment banking at DBP.
“Since last year, we have received a number of proposals from across Asia, Middle East and Europe, to partner or inquire on a sale.” These have come from both full-fledged Islamic banks and universal banks with Islamic units, said Chua, who did not identify the parties.
“As far as Al Amanah, the government is currently in review of the whole process. The Government wants to ensure the framework is in place before privatising.”
REUTERS
