MinDA backs for a strong Islamic financial system in Mindanao

Secretary Alonto

ROCAYA SUMNDAD OTICAL-YAHYA

Marawi City, Lanao del Sur

December 1, 2016

Datu Abul Khayr Alonto, chair of the Mindanao Development Authority (MinDA), said his agency strongly advocates for a strong Islamic financial system in Mindanao, particularly in the Autonomous Region in Muslim Mindanao (ARMM) and the rest of the Bangsamoro areas.

Once a strong Islamic financial system is in place, he added, it will trigger inflow of investments that will benefit not just Muslims but non-Muslims as well who intend to adhere to its basic principles.

Alonto was speaking at a meeting of the Committee on Banks and Financial Intermediaries of the House of Representatives held November 22 last year. He was invited to the meeting by Representative Sitti Djalia Turabin-Hataman, chairperson of the House Committee on Muslim Affairs and Mr. Wilfredo Cainglet Jr., the committee’s secretary

The meeting was to discuss two proposed bills seeking to amend Republic Act Number 6848, known as the Charter of the Al-Amanah Islamic Investment Bank of the Philippines.

“Currently, there are more than 270 Islamic financial institutions located in 75 countries all over the world. It is a US$1.8 trillion industry and has a projected value of about US$4 trillion by 2020,” Alonto stressed.

Part of Alonto's speech to the House Committee's meeting follows:

“We believe that Islamic financing promotes financial inclusion in Mindanao, particularly in the Bangsamoro areas, where 89 percent of the Bangsmoro population are unbanked. In addition, it supports to peace and development programs and will provide Mindanao’s Small and Medium Enterprises or SMEs access to microfinance.

“Take the Islamic Development Bank for example, an international institution that focuses on bolstering economic and social development of its member countries. Through capitalization and provision of grants in accordance to the the Shari'ah principles, it empowers communities, fights poverty, and restores the dignity of the people.

"Islamic financing also complements to our efforts to push Mindanao’s halal industry. One of our end-goals is to make Mindanao as the country’s halal center by encouraging private sector players to be part of the market. There are potential investors from Islamic countries that are looking at Mindanao as viable investment destination, particularly in developing the region’s halal industry. Many of these investors are keen on ensuring that financial investment through halal are compliant to the Shari'ah principles.

"A healthy Islamic financial system will facilitate for the development of sukuk for Mindanao or known as Islamic bonds that are structured in such way that will generate returns to investors without infringing Shari'ah principles. These bonds represent undivided shares in the ownership of tangible assets relating to particular projects or special investment activity.

Sukuk could be promoted as means of raising capital for infrastructure projects. In doing so, it also opens Amanah bank and Islamic banking in general to bigger, wider investor base. The sukuk market is being dominated by our EAGA neighbours, Malaysia and Indonesia. Brunei also plays a significant role.

“Islamic financing will also provide an alternative to conventional banking for non-Muslims. Learning from the lessons of the past global financial crisis, investors are now looking towards alternative financial systems that are sustainable and ethical, while having the capacity to deliver high impact investments.

“It is our hope that in the near future, the ARMM will eventually be utilizing the Al Amanah Bank as the official bank for government-related transactions.

“Given all the current realities in the ground, we recommend that government institutions should enable the full implementation of Islamic financing in Mindanao. One of these is to enhance the Shari'ah Board, or the Shari'ah Advisory Council, as the super body that would provide standards and guidelines relating to Islamic Financing. The council would then certify and attest whether such standards and guidelines have been met.

“We also need to develop, organize, and tap experts in Islamic Banking and Finance, while address problem areas that need expert opinion or intervention.

“In a legal framework, we hope to provide an environment where Islamic Banking can operate with conventional banking, execute existing laws enabling Islamic Financing such as R.A. 6848 and the Organic Act of the ARMM, as amended.

"We also need to embark on massive information dissemination and promotion of Islamic financing to lessen pre-conceived biases against the practice of Islamic financing.

"With all of the above recommendations, we at MinDA believe that there should be a sense of urgency among both Muslim and non-Muslim Filipinos in the full implementation of Islamic financing in Mindanao. This task requires strong partnerships among key stakeholders in the government and the private sector, aided with the support of key international organizations and other friendly governments.

"Islamic finance and banking is a growing global institution. Muslims should be made aware that Islam is not just about devotional acts, but is also about economic development and progress.

"The country as a whole must feel the need to reach out to its Muslim regional neighbors because of the urgent need for economic collaboration and integration. This is something that a Mindanao-wide agency like MinDA can address with the support of President Rodrigo Duterte’s Administration.

“Once again, good morning, and Wassalam!” 

(With story from MinDA News)