AAIIBP,
the only Islamic bank in the Philippines chartered with universal
banking capabilities, came into existence in 1990 by virtue of
Republic Act No. 6848 (“Charter”), which repealed
the law creating the Philippine Amanah Bank, AAIIBP’s forerunner.
AAIIBP was primarily established to promote and accelerate socio-economic
development of the Autonomous Region of Muslim Mindanao (ARMM)
by performing banking, financing and investment operations, and
to establish and participate in agricultural, commercial and industrial
ventures based on the Islamic concept of banking. The Charter
allows AAIIBP to execute functions similar to commercial and universal
Banks, thus it is authorized to offer Investment banking services.
Ownership
Structure
AAIIBP
has an authorized capital stock of Php1 billion divided into 10
million par value shares of Php100 each. The subscription to and
ownership of such shares, including the transfer thereof to third
parties shall be limited to persons and entities who subscribe
to the concept of Islamic banking.
Its authorized capital stock is classified as follows:
Note: AAIIBP share has a par value of Php100.
A total of 502,356 Series A and B shares are outstanding and issued
to GRP, Development Bank of the Philippines (DBP), Government
Service and Insurance System (GSIS), Social Security System (SSS),
Privatization and Management Office (PMO) and private individuals.
The
remaining 9,497,644 shares are still unissued/unsubscribed to
date.
Branches
Currently,
AAIIBP operates nine branches located in Makati City (financial
capital of the country) and in several cities and provinces in
Mindanao: (1) Cotabato; (2) Iligan City; (3) Marawi City; (4)
Cagayan de Oro; (5) Davao; (6) Jolo; (7) Zamboanga (head office);
and (8) General Santos.
Three out of the nine branches have already been transformed into
full Islamic banking operations (Marawi, Cotabato and Jolo), while
the remaining branches are still performing conventional commercial
banking. AAIIBP maintains an executive office in Makati City to
ensure efficient coordination of the bank with the main offices
of concerned government agencies as well as major banking institutions.
Banking
Services
By
virtue of its Charter, AAIIBP is given the power, among others,
to perform the following banking services:
- Open
current or checking accounts;
- Open
savings accounts for safekeeping or custody with no participation
in profit and losses except unless otherwise authorized by the
account holders to be invested;
- Accept
investment account placements and invest the same for a term
with AAIIBP’s funds in permissible transactions on participation
basis;
- Accept
foreign currency deposits from banks, companies, organizations
and individuals, including foreign governments;
- Buy
and sell foreign exchange;
- Act
as correspondent of banks and institutions to handle remittances
or any fund transfers;
- Accept
drafts and issue letters of credit or letters of guarantee,
negotiate notes and bills of exchange and other evidence of
indebtedness under the universally accepted Islamic financial
instruments;
- Act
as collection agent insofar as the payment orders, bills of
exchange or other commercial documents are exclusive of riba
or interest prohibitions;
- Provide
financing with or without collateral by way of leasing, sale
and leaseback, or cost plus profit sales arrangement;
- Handle
storage operations for goods or commodity financing secured
by warehouse receipts presented to the Bank;
- Issue
shares for the account of institutions and companies assisted
by the Bank in meeting subscription calls or augmenting their
capital and/or fund requirements as may be allowed by law; and,
- Undertake
various investments in all transactions allowed by the Islamic
Shari'a in such way that shall not permit the haram (forbidden),
nor forbid the halal (permissible).
As
a government bank, AAIIBP is currently authorized to act as an
official depository bank of the government or its branches, subdivisions
and instrumentalities and of government-owned and –controlled
corporations, particularly those doing business in ARMM. Once
privatized, AAIIBP will no longer be considered as a government
bank; and will have to incorporate under the Corporation Code.
Subject to BSP approval, the privatized AAIIBP can continue to
accept funds from government agencies and corporations.
Apart
from Islamic banking services, AAIIBP currently offers conventional
banking services. In accordance to Resolution No. 1440 dated November
23, 2006, the Monetary Board (MB) allows the extension of transformation/transition
period of at least five years after privatization of AAIIBP. Hence,
the privatized AAIIBP may continue to perform both Islamic and
conventional banking business before transforming to a full Islamic
bank. Nevertheless, as a condition, the new owners/investors must
submit a program and timetable for the phase-out of the conventional
banking business of AAIIBP to BSP within six months from take-over.
AAIIBP
participates in or provides financing for the projects or asset
acquisition of its clients in several modes. Presently, AAIIBP’s
financing activities are being offered to its customers under
the following principles:
- Mudarabah
(Trustee Project Financing)
- Musharaka
(Joint-Venture)
- Murabaha
(Cost-plus/Mark-up)
- Bai
Bithaman Ajil (Deferred Sale)
- Ijirah
(Leasing)
- Bai
ul-Takijiri (Leasing ending in ownership)
- Qardh
ul-Hasan (Benevolent Loan)
INDUSTRY
AND ECONOMIC DEVELOPMENTS
Extraordinary
progress on the global front
- Presently,
there are more than 250 Islamic financial institutions operating
worldwide in some 50 Muslim and non-Muslim countries.
- Total
assets of Islamic banking industry has exceeded USD250 billion
and is expected to expand by 8% to 15% from 2005 to 2009.
- Islamic
banks are currently managing funds of about USD200 billion.
The Islamic banking industry is expected to manage at least
40% to 50% of total savings of Muslims worldwide in 8 to 10
years.
- Approximately
USD800 billion of latent Islamic capital is presently invested
in conventional banks throughout the world.
Stable
and profitable Philippine banking industry
- Bank
deposits in the Philippines grew at an average annual rate of
8%, from Php2.20 trillion in 2001 to Php2.97 trillion in 2005.
As of end-September 2006, deposit liabilities of Philippine
banks already reached Php3.27 trillion, 12% higher than that
of recorded during the same period in 2005. BSP projected that
deposit liabilities reached Php3.5 trillion as of end-2006.
- Banks’
lending activities were active from 2001 to 2005, resulting
to a 5% year-on-year increase in total loans (net) from Php1.67
trillion to Php2 trillion). By end of September 2006, loan portfolio
expanded to Php2.11 trillion, higher by 10% as compared to that
of recorded in September 2005 (Php1.92 trillion). As of end-2006,
BSP estimated the loan portfolio of Philippine banks at Php2.3
trillion.
- The
Philippine banking industry has been very profitable, recording
a 33% annual growth rate from 2001 to 2005. In 2006, the banking
industry’s net income is estimated to reach Php57.35 billion,
29% higher as compared to Php44.61 billion in 2005.
- PU
Investment houses' net income increased from Php889 million
in 2001 to Php1.220 billion in 2005, registering an annual growth
rate of 8%.
Growing
remittances from Overseas Filipino Workers (OFWs)
- Overseas
remittances had an average growth rate of 13% from 2000 to 2006.
- In
2006, remittances from OFWs totaled USD12.8 billion or 20% higher
than the USD10.7 billion reported in 2005.
- Approximately
56% of those remittances came from the United States and Canada,
while 15% came from the Middle East.
Economic
growth and investments in Mindanao
- Mindano’s
gross domestic regional product (GRDP) grew at an average rate
of 4.4% from 2000 to 2005. During the 6-year period, Mindanao
regions contributed about 18% of the annual GDP of the Philippines.
- AAIIBP’s
major base of operation, Mindanao, has been attracting major
domestic and foreign investments. In 2005, a total of 35 projects
amounting to approximately Php7.58 billion (USD 150 million)
was committed by several investors.
- Mindanao
is envisioned by the GRP to be the country’s main agro-fishery
export zone. The GRP recognizes that the full potential of Mindanao
as an agribusiness hub has yet to be tapped. Its strategic location
within the East Asian region makes it a potential major transhipment
point and center of trade in the region.
UNIQUE
SELLING POINTS
Islamic
bank pioneer in the Philippines
-
AAIIBP is the first and, to date, the only Islamic Bank legally
authorized to operate in the Philippines. Hence, it currently
has the exclusive right to perform transaction undertakings
that require compliance to Islamic economic and banking principles.
- AAIIBP
is already positioned to move forward in an emerging industry.
AAIIBP has gained market awareness/identity, particularly in
Mindanao, which can be further intensified with aggressive marketing
efforts.
- Having
the first mover advantage, AAIIBP has the ability to help shape
the regulatory framework, policies and standards that will be
imposed and exercised by the BSP on Islamic financial institutions.
Islamic
banking license can perform banking services similar to universal
banks
- AAIIBP
is empowered by its Charter to perform banking services similar
to those being offered by commercial and universal banks to
their customers, subject to the condition that these products
and services should be compatible to Islamic principles.
- Similar
to a universal bank, AAIIBP has the authority to perform concurrently
the functions of an investment house. AAIIBP can carry on various
commercial operations to the extent permissible as determined
by Shari'a principle.
Opportunity
to offer takaful products and services
-
AAIIBP has the advantage of offering takaful (Islamic insurance)
to the Muslim population in the Philippines. Currently, there
are no companies specializing on Islamic insurance in the Philippines.
Power
to invest in allied enterprises
- The
Charter specifically provides that it is permitted to invest
in the following allied undertakings: (1) warehousing companies;
(2) leasing companies; (3) storage companies; (4) safe deposit
box companies; (5) companies engaged in the management of mutual
funds but not in the mutual funds themselves; and (6) other
similar activities as the Monetary Board has declared or may
declare as appropriate from time to time, subject to existing
limitations imposed by law.
Branch
expansion in the Philippines and other countries as well
-
AAIIBP is permitted to establish and operate Islamic bank branches
and agencies in provinces and cities in the Philippines and
such correspondent offices in other areas in the country or
abroad as may be necessary to carry on its Islamic banking business,
subject to the laws, rules and regulations of the BSP.
- With
the approved phased liberalization of bank branching policy,
AAIIBP has an opportunity to establish new branches as well
as relocate/transfer existing branches, subject to limitations/requirements
imposed by BSP. Further, Mindanao, which is predominantly Muslim,
is included in the critical areas where establishment of new
bank branches is encouraged.
- In
its Resolution No. 1440 dated November 23, 2006, the MB has
allowed the privatized AAIIBP to establish branches in restricted
areas, specifically in Metro Manila, provided that such branches
shall provide Islamic banking services only. Exemption will
allow AAIIBP to open branches anywhere in the Philippines and
fully accomplish its purpose of addressing the needs of the
Muslim communities throughout the country as well as bring an
alternative form of banking to non-Muslims.
Wide
target market
- As
an Islamic bank, AAIIBP’s niche market is the Muslim population
in the Philippines. As of 2000, there were approximately 3.9
million Muslims all over the Philippines (approximately 5% of
the total population). 56% of the Muslim population (2.2 million)
resided in the Autonomous Region of Muslim Mindanao (ARMM).
- AAIIBP’s
target market should not be limited to Muslims. It should target
even the non-Muslim population, mimicking the success and popularity
of Islamic Banks in non-Muslim countries.
Opportunity
to offer remittance services to OFWs in the Middle East
-
AAIIBP can expand its current banking products and services
to include remittance services particularly to Filipinos working
in the Middle East. These services are deemed to be lucrative
considering the growing amount of remittances from OFWs abroad.
The Charter of AAIIBP allows it to offer remittance services.
Link
to Muslim institutions and countries
- AAIIBP
can serve as a link/gateway to Brunei, Indonesia, Malaysia,
Philippines – East ASEAN Growth Area (BIMP-EAGA) sub-regional
trade zone and to the economy of other Muslim countries. Connection
to these institutions and countries can help increase trade,
investments and tourism particularly in Mindanao region.
- As
an Islamic bank, AAIIBP can easily relate with the predominantly
Muslim players in the BIMP-EAGA who have lined up investments
in Mindanao. AAIIBP can offer its Islamic banking services and
facilities suitable to these investments or trade activities.
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