Philippine government entities, companies embark on sukuk financing despite lack of regulations

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Wednesday 21 Oct 2015 - 11:44 Makkah mean time-8-1-1437 Manila (IINA) - Financing through sukuk (Islamic bond) is becoming an option in the Philippines to consider for the Philippino companies and government entities in the coming days, Gulf Times reported. In the first move of its kind, the country’s largest property developer Ayala Land Inc said that it is planning to raise funds through sukuk financing for its recent investments in Malaysia. “We are talking with a couple of banks to explore sukuk financing,” said Jaime Ysmael, the company’s chief finance officer, adding, “we see if we can finance our investment in Malaysia with a ringgit-denominated finance structure.” Earlier this year, Ayala Land acquired a 9.16 percent stake in Malaysia’s property development company MCT Bhd through a private placement worth $43 million, Ayala Land’s first significant investment in Southeast Asia outside of the Philippines. Apart from Ayala Land’s considerations to tap the Islamic finance market, there are other entities in the Philippines preparing sukuk issues. State-owned Al-Amanah Islamic bank, the first and only Islamic bank in the Philippines, headquartered in Zamboanga city in the Muslim-majority Mindanao Island, recently said it may sell the nation’s first Shariah-compliant bond to finance development in Muslim Mindanao, one the poorest regions in the country. “There’s a lot of money in the sukuk market that we can tap,” Al-Amanah President Armando Samia said, adding that “we are still in the very exploratory stage. Getting the first one out is difficult.” One problem is that in the Philippines there is currently no regulatory framework for Islamic banking. While Al-Amanah bank claims to be the only bank in the country with a mandate to sell Islamic notes. The Philippines government has become aware of the growing demand for Islamic financing, especially, but not only in Mindanao where people and companies so far had not many options to use Islamic finance services. Better regulation, as well as more Islamic banks and Shariah-compliant finance vehicles could give the region’s development a desperately needed boost. The autonomous region of Muslim Mindanao has per capita gross domestic product that’s about 23 percent of the national average. According to Philippine Central Bank Governor Amando Tetangco, the government in Manila is drafting a bill to facilitate the expansion of the Islamic finance industry not just to elevate the industry in the South, but also in an attempt to diversify public funding sources. Sukuk are “definitely” a funding option for the Philippine government, National Treasurer Roberto Tan said earlier this year, adding that he hoped congress would pass the respective legislation “soon.” SM/IINA