Malaysian banking giant CIMB Group, a leading ASEAN Islamic bank, is pursuing its interest to acquire the Philippines Al-Amanah Bank, which will require between $115 to $230 million in fresh investments to serve the huge Islamic financing needs in the country.
Aleem Siddique Guiapal, director of the Muslim Economic Affairs of the National Commission on Muslim Filipinos, told reporters at a roundtable with Alliance for Halal Integrity in the Philippines that CIMB plans to pursue its plans to acquire Al-Amanah to boost its regional presence.
CIMB’s original plan was to enter the Philippine market via Bank of Commerce but Guiapal said this did not push through because Bank of Commerce cannot meet with the 5 per cent minimum halal compliance rule.
“So, now they are doing it directly,” said Guiapal.
Guiapal said Al-Amanah, which is now majority-owned by state-run Development Bank of the Philippines (DBP), has been in dire need for a recapitalisation to be able to serve the Islamic banking services in the country and to compete within the ASEAN Economic Community to be established by the end of 2015.
Personally, he said the Al-Amanah bank should be better kept by the government. “It should rather be recapitalised and developed to have the capability and expertise of an Islamic banking institution.”
However, the rationale of the DBP in selling the country’s only Islamic bank is because of the lack of technical expertise in Islamic banking in the Philippines.
Guiapal, however, noted the government may have changed its mind on Al-Amanah especially with the implementation of the Bangsamoro peace agreement. Al-Amanah is one of the five pillars of that peace agreement.
Al-Amanah has only $23 million in total assets and has been practically not in operation for a long time already.
An Islamic bank cannot impose profit rates higher than 20 per cent. Guiapal said the problem of the regular commercial banks is they compounded interest on loans that at times interest payments ended up higher than the principal amount.
Under the Islamic banking law, it has been prescribed that that the lender should not take advantage of the need of the borrower.
CIMB Group is a leading ASEAN universal bank, the largest Asia Pacific (ex-Japan) based investment bank and one of the world’s largest Islamic banks.
It is headquartered in Kuala Lumpur, Malaysia, and offers consumer banking, wholesale banking, Islamic banking and asset management products and services. As the fifth largest banking group in ASEAN, it has over 40,000 staff in 17 locations across ASEAN, Asia Pacific and beyond.
Originally published on www.investvine.com