Central bank OKs Al Amanah sale

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has given its final approval for state-run Development Bank of the Philippines’ (DBP) plan to acquire Al-Amanah Islamic Bank of the Philippines. BSP Deputy Governor and Officer-in-Charge Armando L. Suratos said the Monetary Board’s approval will enable DBP to gain full control of the Islamic bank by acquiring the national government’s stake pegged at around 69%, state-run pension funds Social Security System and Government Services Insurance System’s combined holdings of 20%, and private individual investors’ stake of around 1%. Before its takeover, DBP held 10% of the Islamic bank. Mr. Surratos also said Al-Amanah will continue to operate as a commercial bank but will revert to an Islamic banking entity five years after its sale to the state lender. The central bank allowed Al-Amanah to operate as a commercial bank in 2006 to make it profitable and make it easier for the government to sell its assets to investors. The central bank and the Privatization Management Office of the Department of Finance had previously allowed DBP to buy the Al-Amanah shares at par value. Mr. Suratos did not disclose the price for the purchase. Under the terms of the purchase, DBP’s payment will not be booked as state revenues but will instead be used to write-off the Islamic bank’s liabilities. Al-Amanah, the first and only Islamic bank in the country, whose mandate is to serve the banking needs of the Muslim community in the country, was formed by virtue of Presidential Decree No. 264 issued by then President Ferdinand E. Marcos. An Islamic bank adheres to the laws of the Koran, and as such, does not charge interest but instead earns by acting like an equity investor to its borrowers by forging partnerships, lease-to-own deals and similar arrangements. The government first attempted to privatize the Islamic bank sometime in 2000 after it started incurring losses in 1990. The bank’s liabilities, as of 2005, ranged from P400 to P500 million while its assets summed up to P115 million. Al-Amanah has liquid assets of P43.377 million while its non-performing loans account for 97% of its loan portfolio. DBP had earlier expressed optimism in Shariah or Islamic banking. Market observers noted that Islamic finance is one of the fastest-growing markets in the world with at least $300 billion worth of funds so far attracted. Islamic banking has also been estimated to be growing by as much as 20% a year, largely fuelled by wealth from oil.- Gerard S. dela Peña, BusinessWorld