Economy


BSP open to amending Al-Amanah charter




Posted on January 07, 2014


MONETARY authorities are open to amending the charter of Al-Amanah Islamic Investment Bank of the Philippines (Al-Amanah) to encourage the entry of more players into Islamic banking, the central bank chief said.

“If we want to promote Islamic banking, we have to amend [the charter of Al-Amanah] because, under its charter, it is the only Islamic bank authorized to operate in the country,” Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. told reporters in an interview last Friday night.

Al-Amanah, a fully owned subsidiary of the Development Bank of the Philippines, is the first and only Islamic bank authorized to practice Islamic banking in the country.

It is mandated to serve the banking needs of the country’s Muslim population. The bank was formed by Presidential Decree (PD) No. 264, issued by then President Ferdinand E. Marcos in 1974.

In 1990, the Charter of Al-Amanah Islamic Investment Bank of the Philippines (Republic Act No. 6848) was signed into law, authorizing the bank as the only institution to conduct Islamic banking business. The bank’s charter repealed PD 264.

An Islamic bank adheres to laws based on the Koran. It does not charge interest to its clients but instead earns by acting like an equity investor to borrowers by forging partnerships, lease-to-own deals and other similar arrangements.

Mr. Tetangco said the BSP is looking at various models for Islamic banking that may be applied in the country.

“One model is Islamic banking undertaken by western-style institutions. These are institutions with Islamic banking units as there are specific practices that should be consistent with shariah law. Another is the model of a stand-alone Islamic bank,” Mr. Tetangco said.

Moreover, he noted: “There are groups that are interested in pushing Islamic banking in the Philippines, so we can work with those groups [in amending the charter].”

In September last year, BSP Deputy Governor Nestor A. Espenilla, Jr. said the central bank is working on the creation of a regulatory framework for the practice of Islamic banking in the country.

With these regulations, he said, banks will have the “flexibility to design products based on Islamic practices.”

Bankers have said that the absence of a regulatory framework to guide the local banking industry in the conduct of Islamic banking has been the hindrance in practicing Islamic finance in the country. -- Ann Rozainne R. Gregorio