Banking Experts: PHL must bolster, mainstream Islamic banking
Experts: PHL must bolster, mainstream Islamic banking
THURSDAY, 08 MARCH 2012 20:59 ESTRELLA TORRES / REPORTER
AMID the global financial crisis that has weakened US and European
economies, Islamic bank experts urged the Philippines to relax tax and
regulatory landscapes to tap the US$1 trillion worth of
Shariah-compliant assets by mainstreaming the Islamic banking system.
The experts, however, said lingering perceptions that Islamic banks act
as financial instruments of terrorists and restrictive regulatory and
taxation rules in the Philippines are the major roadblocks to the
mainstreaming of Islamic banking which have been fueling investments and
growth in many countries including Britain and Malaysia.
British Ambassador to the Philippines Stephen Lillie said mainstreaming
Islamic banking in the country could fuel growth and development in the
poverty- and conflict- stricken provinces in Mindanao.
He said many Filipino Muslims feel exclusion from the financial
activities in the country and this has contributed in the worsening
poverty situation in Mindanao.
"There is an increasing opportunity of Islamic banking [now being
mainstreamed] in the network of international economic relations. This
is one way to tap liquidity from the Islamic world," said Ambassador
Lillie in an interview with the BusinessMirror during a British Embassy
forum on "Enabling Islamic Finance in the Philippines" held Thursday at
the Mandarin Hotel in Makati City.
According to Al-Amanah Islamic Investments Bank of the Philippines,
Muslims comprise 10 percent of the 90 million people in the Philippines.
The bank has its main branch in Zamboanga City and has nine branches
across Mindanao. Its office in Makati was built in 1990 and is now
undergoing rehabilitation. It is the only Islamic bank in the country.
Maharlika Alonto, head for Accounting and Finance of the Al Amanah Bank,
said the lack of legal and regulatory framework for the Islamic banking
system serves as a major roadblock in mainstreaming Islamic banking in
the country.
In her speech, she cited the demographics of the Autonomous Region of
Muslim Mindanao (ARMM) which is plagued with the lingering problems of
poverty and Muslim extremism. "Islamic finance system is perceived to be
a means to Islamic extremism."
She said domestic laws have to be harmonized with the global measures to
mainstream Islamic financial systems to gain from the momentum of
liquidity in the Islamic economy.
Alonto said the Bangko Sentral ng Pilipinas still has no detailed
provision on Islamic banking system and there is no Islamic window for
investments.
On tax implications, the government, she said, imposes double taxation
on the transfer of capital assets and the Philippine Deposit Insurance
Corp. (PDIC) does not cover Islamic deposits.
Alonto said there is a need to establish a National Shariah Advisory
Council in the Philippines, similar to the one established in Malaysia,
to push for Islamic banking in the country.
She said the government has to support measures such as financial
literacy on Islamic finance and technical capacity build-up on Islamic
banking.
Speaking on the experiences of Britain that has levelled the playing
field for Islamic banking systems through equal taxation and providing
incentives for Islamic mortgages, Ambassador Lillie said that Islamic
finance will grow and Southeast Asia will be a top source of growth.
"As we look at opportunities for Islamic finance in the Philippines, we
look to the UK, a predominantly Christian country, as a reference of how
this sector can be set up and developed in another predominantly
Christian market," said the British envoy in his speech during the forum.
"Islamic finance has grown rapidly in the past decade, and the city of
London, with its commitment to financial innovation and outstanding
global reach, has been a big part of this. As the Philippines seeks to
expand its investor base, it should look seriously at how it could
follow our example to attract more funds from Muslim countries by
offering Shariah compliant products."
He said global Islamic finance has grown significantly during the last
decade. In 2006–2009, Sharia-compliant assets doubled to more than $1
trillion. Sukuk bond issuance, Islamic debt and equity papers, grew 50
times from 2001 to 2010 despite slow global growth in the aftermath of
the 2008 global financial crisis.
Wasim Saifi, global head for Islamic banking of Standard Chartered PLC,
said the rapid growth of Islamic banking made it a part of the global
mainstream banking system. Although with only a one percent share of
global banking, its US$1 trillion Sharia assets made it part of the
mainstream and not just a niche in the global banking system.
He said there is rapid growth in the penetration level of Islamic
banking due to the high liquidity of the Islamic world.
"Islamic banks are becoming more sophisticated in terms of service,
technology and product range," said Saifi.
But he said the rapid growth of the Islamic banking system is due to the
widening interest of the young generation of Muslims who are trying to
relate with their religious identity and the increasing support of many
governments for Islamic banking through regulatory reforms.
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