Philippines Mulls Debut Sale of Sukuk
The Philippines’ state-owned Al-Amanah Islamic Bank may sell the nation’s first Shariah-compliant bonds to finance development in Muslim Mindanao. Armando Samia, president of Al-Amanah, the only bank in the Philippines with a mandate to sell the Islamic notes said that there was a lot of money in the market for sukuk that can be tap. Lack of regulations governing issuance makes it difficult to sell securities in the Philippines that comply with the religion’s laws banning payment of interest.
The Autonomous Region of Muslim Mindanao had per capita gross domestic product that’s about 23 percent of the national average. BNP Paribas Investment Partners, which manages the equivalent of $700 billion globally, said investors would be interested in the bonds. Global sales of debt that conform to Shariah law haven fallen 29 percent to $6.65 billion this year. The state-run Islamic Bank of Thailand plans to sell sukuk to expand financial services for minority Muslims, while Tokyo-based Nomura Holdings is raising $100 million in its first sale in Malaysia as it develops a Shariah-compliant business. Muslims in the Philippines account for about 10 percent of the country’s 100 million population.
The Philippines is rated BB-minus by Standard & Poor’s and Ba3 by Moody’s Investors Service, their third-lowest non-investment grades. Sovereign sukuk are more attractive compared to corporates because these have attractive yields and lower perceived default risk. A bill was being drafted by BSP ( Philippine central bank ) to facilitate the expansion of the Islamic finance industry as the government diversified funding sources.
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