This year's rush by top-rated non-Muslim countries to tap the burgeoning Islamic finance market may not be repeated next year but a new crop of sovereign entrants, mostly from emerging markets, is waiting around the corner.
The United Kingdom, Hong Kong and Luxembourg - all ranked at least AA by rating agencies - issued sharia-compliant financial instruments, or sukuk, for the first time in 2014. They gave a huge boost to a market which was once just seen as a funding tool for borrowers from the Gulf and Muslim countries in southeast Asia.
The future of Islamic finance in the Philippines lies in the central bank’s “open approach” system and the government’s move to harmonize regulations to encourage the establishment of Islamic banks in the country.
“The UK has long encouraged an open approach to Islamic banking within its own regulatory borders,” said economic advisor Aaron Francis Chan of the British Embassy in Manila.
Asia presents huge developmental potential for Islamic finance and is likely to be the main driver of Islamic banking growth in the near future given the untapped potential in India, Bangladesh and Indonesia, according to a report. Islamic finance can be utilised for greater integration of financial markets with the real economy and for improvement of the economic balance between emerging and frontier markets, according to Kuwait Finance House Group report. Islamic banking is banking that is consistent with the principles of Sharia which prohibits acceptance of specific interest or fees for loans of money.
Malaysia, lead global player in Shariah lending, is extending a helping hand to the Philippines whose only Islamic banking institution in existence has failed to live up to its mandate.
According to the Halal Islamic Chamber of Commerce and Industry in the Philippines (HICCIP), the Al Amanah Islamic Investment Bank in Manila has failed to meet its mandate of meeting the financial services requirements of up to 15 million Filipinos who are Muslims and may not avail themselves of services delivered by the country’s regular commercial lenders.
A Memorandum of Understanding (MOU) to facilitate international cooperation between the Islamic Financial Services Board (IFSB) and the Asian Development Bank (ADB) in promoting the development of Islamic finance in common developing member countries was signed today at the ADB headquarters in Manila.
Financial institutions based in the United Kingdom on Thursay called on the Philippine government to enact laws and rules that would allow Islamic finance (IF), explaining that the country stands to gain from over $1 trillion in global funds on tap.
According to British Ambassador Stephen Lillie, Islamic finance is very much relevant to the Philippines and that there “is potentially a big opportunity.”
Islamic finance could provide some of the multi-billion-dollar loans needed by Asia to pay for $US8 trillion in infrastructure costs over the next decade, says ratings agency Standard and Poor's (S&P).
Islamic financing is a growing source of loans worldwide and is now a better way to fund huge Asian infrastructure deals than banks, S&P says in a new report.
A Muslim body backed by the Philippines government wants Middle East investors to take a stake in the country's sole sharia lender to help kickstart its Islamic banking industry.
Gulf investors can provide the needed capital to Al-Amanah Islamic Bank, which aims to accelerate the socio-economic development of the Autonomous Region of Muslim Mindanao, said Datu Tahir Lidasan Jr, a director with the National Commission for Muslim Filipinos.
The Philippines’ state-owned Al- Amanah Islamic Bank may sell the nation’s first Shariah- compliant bonds to finance development in Muslim Mindanao, the poorest region and base of Abu Sayyaf separatist militants.
“There’s a lot of money in the market for sukuk that we can tap,” Al-Amanah President Armando Samia, whose bank is the only one in the Philippines with a mandate to sell Islamic notes, said in an interview yesterday. “We’re still in the very exploratory stage. Getting the first one out is difficult.”