ARMM Gov’t Aims to Acquire DBP Shares in Al-Amanah Islamic Bank

The Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) is moving forward with a transformative plan to acquire shares from the Development Bank of the Philippines (DBP) in Al-Amanah Islamic Bank. This acquisition, which was recently approved by the Intergovernmental Fiscal Policy Board (IFPB), represents a major milestone for the region in promoting financial inclusion and advancing socio-economic development through Islamic banking. The approval, granted during the IFPB’s seventh meeting in early September 2024, signifies the growing momentum behind BARMM’s vision to enhance its financial infrastructure, particularly through the expansion of Islamic finance practices.

The Role of Al-Amanah Islamic Bank in BARMM’s Development

Al-Amanah Islamic Bank, established as the Philippines’ first and only Islamic bank, holds a unique position within the country’s financial landscape. Recognized as a universal bank, Al-Amanah operates with an authorized capital stock of PHP 1 billion, offering a variety of banking services, including deposit-taking, investment opportunities, and financing based on Islamic principles. With a network of nine branches, the bank is structured to support agricultural, commercial, and industrial ventures, essential pillars for the economic upliftment of BARMM.

The proposed acquisition of shares in Al-Amanah by the BARMM government is not just a financial transaction; it is an opportunity to deepen the integration of Islamic banking into the region’s economy. By utilizing Al-Amanah’s existing framework, BARMM can sidestep the enormous cost of setting up a new bank. According to estimates, establishing a new universal bank would require around PHP 6 billion in capital—a substantial investment that can now be allocated to other regional development priorities. This strategic acquisition, therefore, enables BARMM to leverage Islamic banking as a tool for accelerating growth, providing essential services tailored to the needs of its population.

Islamic Finance in the Philippines

Islamic finance, based on Shariah principles, has been gaining traction globally, and its growth in the Philippines marks an important step for the country’s banking sector. The Islamic banking system forbids interest (riba) and emphasizes risk-sharing, transparency, and social equity. This type of banking is especially important in regions like BARMM, where a significant portion of the population adheres to Islamic teachings.

The acquisition of Al-Amanah aligns with Republic Act No. 6848, which sets the bank’s mandate to support the socio-economic development of BARMM. The Bangsamoro Organic Law (BOL), which governs BARMM’s fiscal autonomy, also stipulates that the region should have a greater role in financial institutions that can support its development agenda. By taking control of Al-Amanah, the BARMM government will be better positioned to direct financial resources into sectors like agriculture, infrastructure, and industry, which are critical for the region’s growth.

In recent years, BARMM has experienced both challenges and opportunities in its quest for economic stability. Poverty, lack of infrastructure, and historical conflict have hindered progress, but the region is now undergoing a significant transformation. Al-Amanah Islamic Bank could play a crucial role in providing access to financing for businesses and infrastructure projects that align with Islamic values. This move towards Islamic finance is also part of a broader strategy to increase the financial inclusion of Muslim communities, which have often been underserved by conventional banking institutions.

Strategic Importance of the Acquisition

The Bangsamoro government’s acquisition of DBP’s shares in Al-Amanah Islamic Bank reflects a broader shift towards regional financial autonomy. By gaining control of the bank, BARMM will have a more direct influence over the financing of key government policies and projects. This is particularly relevant for projects that might not receive adequate support from other commercial banks. The focus on Islamic finance also underscores the government’s commitment to ensuring that financial services in the region are aligned with local customs and religious values.

Islamic finance can offer unique solutions to the socio-economic challenges faced by BARMM. For example, through the principle of mudarabah (profit-sharing), Al-Amanah could provide financing to entrepreneurs and small businesses that otherwise might struggle to secure loans from conventional banks. Similarly, the principle of Murabaha (cost-plus financing) can be used to support infrastructure development, allowing the region to invest in critical projects while adhering to Islamic ethical standards.

This acquisition also opens the door for BARMM to introduce more innovative and competitive financial products, increasing market competition and giving consumers more options. The expansion of Islamic finance services is expected to attract investments and stimulate economic growth, which could have a ripple effect across various sectors of the regional economy.

Support from the Department of Finance

The Department of Finance (DOF), under the leadership of Secretary Ralph Recto, has expressed strong support for the acquisition. Recto highlighted the importance of building a strong and vibrant Islamic banking system to meet the specific needs of the people of BARMM. He emphasized that this acquisition would accelerate socio-economic development and contribute to the region’s peace and prosperity. The DBP, which currently owns 99.9% of Al-Amanah’s capital stock, is also fully supportive of the transfer and has assured that the bank’s employees are well-equipped to continue running the institution under new ownership.

The backing from these national financial institutions signals confidence in BARMM’s ability to manage Al-Amanah effectively and use it as a tool for advancing the region’s development agenda. The Bangsamoro government, meanwhile, is working on securing the necessary approvals to finalize the transfer. These approvals must come from the Bangsamoro Transition Authority (BTA), the Bangko Sentral ng Pilipinas (BSP), and the Governance Commission for Government-Owned or -Controlled Corporations (GOCCs).

The Future of Islamic Banking in BARMM

As the acquisition process moves forward, expectations are high that Al-Amanah will become a central pillar of BARMM’s financial infrastructure. The region’s leadership has made it clear that they intend to use the bank not only to drive economic growth but also to foster social development by supporting initiatives that align with Islamic principles of fairness, equity, and transparency. The bank’s future success will depend on its ability to introduce products that cater to the specific financial needs of the Bangsamoro people while remaining competitive in the broader banking landscape.

The road ahead for BARMM is promising, with Islamic finance set to play a pivotal role in shaping the region’s future. By acquiring a controlling stake in Al-Amanah, the Bangsamoro government is taking a bold step toward creating a more inclusive, resilient, and prosperous economy for its people. The alignment of financial services with Islamic values could also serve as a model for other regions and countries looking to integrate Islamic finance into their development strategies.

In conclusion, the acquisition of Al-Amanah Islamic Bank represents a strategic move for BARMM that goes beyond financial transactions. It’s a step towards greater autonomy, financial inclusion, and economic progress. With continued support from national and regional stakeholders, Al-Amanah has the potential to become a key driver of BARMM’s future growth and development.