Ateneo de Davao University

Ateneo de Davao

Strengthen Al Amanah Islamic Investment Bank

DURING the Eid’l Fitr Kanduli Celebration last July 8 at SMX Lanang with President Rody Duterte, the President announced the need to help the people of the Autonomous Region in Muslim Mindanao (ARMM).

The assistance that he was referring to was to uplift the socio-economic condition of the people from the different provinces of the ARMM. I was fortunate to attend the symbolic event, and as I listened to his message, I remember the mandate of the Al Amanah Islamic Investment Bank in which I am part of the Board of Directors.

The Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP) is the only bank authorized to conduct Islamic Banking business in our country. Its Charter repealed PD 264 as amended by PD 542, Creating the Philippine Amanah Bank. The law creating AAIBP is RA 6848 which was enacted by Congress last January 26, 1990.

The AAIIBP was created by our government and has committed itself to the establishment of an Islamic bank that operates within a legal framework permitting the investors or participants the rights to equitable or beneficial share in the profits realized from financing productive activities and other operations.

The Charter of the AAIIBP defines its primary purpose as “to promote and accelerate the socio-economic development of the Autonomous Region by performing banking, financing and investment operations and to establish and participate in agricultural, commercial and industrial ventures based on the Islamic concept of banking” (RA 6898, Section 3). The main important nature of the Islamic Bank is that all its business dealings and activities shall be subject to the basic principles and rulings of the Shari’a law. Thus, in order for AAIIBP to function well within the Islamic principle, we need to have experts on the principle of Muamalat.

Muamalat refers to commercial and civil acts or dealings under Shari’a Islamic law. Islamic law divides all legal acts into either ibadat or muamalat. Ibadat are acts of ritual worship such as prayer or fasting, and muamalat are acts involving interaction and exchange among people such as sales and sureties. The distinction is important because the principle in all matters involving ibadat is that they are not susceptible to innovations or change (ittiba). In muamalat, however, there is considerably more room to develop and change the law to facilitate human interaction and promote justice. There is disagreement among Muslim jurists on whether certain legal acts, such as marriage or divorce, fall under the category of muamalat or ibadat. (Oxford Islamic Studies On Line)

The AAIIB can be classified as a banking system that provides a wide variety of financial services, including commercial and investment services. Under Section 6 of its Charter defines the powers of the AAIIBP. Paragraph 1 to 6 defines the power of the AAIBP as a government owned and controlled corporation. Paragraph 7 defines its banking services. Paragraph 8 provides act as an official government depository, or its branches, subdivisions and instrumentalities and of government-owned or controlled corporations, particularly those doing business in the autonomous region. Paragraph 9, 10, and 11 define its investment and financing functions. However, for more than two decades, the Bank did not fully function based on its mandate.

There are several laws that govern the AAIIBP. We have the Bangko Sentral Circular No. 105-96 or the Implementing Rules and Regulations of the RA 6898. We also have the Manual on Corporate Governance which was approved and adopted by the Board of Directors of AAIIBP last April7, 2014 via referendum and noted by the Board last July 24, 2014. The main objective of the Manual is to institutionalize the principles and practices of good corporate governance in the entire organization as prescribed by GCG MC. No. 2012-07 and BSP Circular No. 749-2012. Hence, the bank must have competent members of the Board of Directors and Bank employees that can function and deliver its mandates.

Current Realities

The AAIIBP was sold to another government-owned bank, the Development Bank of the Philippines (DBP) last 2008. However, DBP announced last 2012 that it intended to divest itself of the bank. Because DBP does not have the expertise to handle an Islamic financial institution.

The AAIIBP total Assets for the month of July 2016 is P785.66 million, a decrease from previous month’s total assets of P795.05 million. In comparison to the same period last year, there is an increase of P6.58 million in total assets largely due to higher deposit levels in 2016. The Bank can deliver even more.

According to lawyer Arifa Ala of BSP, there is a significant untapped market opportunity for banks in the Philippines, because only about 30 percent of Filipino adults have deposit accounts at a financial institution, and conventional banking has been slow in covering the Autonomous Region in Muslim Mindanao. With just 20 banks and 28 ATMs present, only 8 percent of the municipalities of the Armm have a banking presence; c. Banks have 34 percent of their physical presence in the National Capital Region (where only 13 percent of the population reside and poverty is low). Developing Islamic Banking and Finance in the Philippines can promote inclusive finance: a. It may also trigger inflows of foreign investments which can in turn be deployed in building necessary infrastructures (Asean Integration and Liberalization of entry of foreign banks in the country).

I agree with the statement of Secretary Jesus Dureza of OPAPP during the press conference of the Peace Roadmap with the Bangsamoro people. He said, our government “can sign a hundred peace agreements, but if those on the ground do not immediately feel the dividends of peace, those agreements will not be sustainable”. The stage for negotiation is over. We now need to implement peace programs of our people. The AAIIBP can invite more investors coming from the Muslim countries to help the people of ARMM. We just need to have competent (Shari’a Finance) and trustworthy people to work in the AAIIBP.