MORE HURDLES

But it is in this field that Mindanaoans seem to face more hurdles than other Filipinos.

Apart from the usual documentary and monetary barriers that keep many locals from opening deposit accounts, the Muslim community is also limited by business models in which commercial lenders operate.

Many residents conduct financial transactions mostly via cooperatives and microfinance nongovernment organizations, according to the Bangko Sentral ng Pilipinas’ (BSP) National Baseline Survey on Financial Inclusion published in 2015. Of those who have savings, some 73.9% said they keep money at home rather than in formal institutions.

There were 243 unbanked cities and towns in Mindanao as of end-June, according to latest BSP data. About a fifth of the country’s 571 unbanked localities were in the Autonomous Region in Muslim Mindanao alone.

This has prodded the BSP to push for the creation of a legal framework for Islamic banking in the country, although such proposal

OPTIONS

Ms. Fonacier said the BSP is exploring two routes to open Islamic banking to more players in the country.

The first option is to amend the charter of the Al-Amanah Islamic Investment Bank — which is currently the sole bank offering the service in the Philippines — to serve as the framework for a Shari’ah-compliant lending platform.

However, being subject to the same laws for commercial banks left this lender less attractive to potential clients.

The alternative is to amend Republic Act No. 8791, or the General Banking Law of 2000, to allow all other firms to open their own Islamic banking windows.

Both proposals, however, remain stuck in the legislative mill.

Shari’ah- compliant banks — which observe “risk- sharing” banking — will be allowed to accept or create demand deposits, take in savings for safekeeping, act as collection agents for interest-free payments, as well as provide collateral-free financing, among others.

Southeast Asia’s economic integration would also add some pressure for the Philippines to embrace Islamic banking, Ms. Fonacier said, as foreign banks could beat local players in serving this untapped market.

SUKUK BONDS

The same legal barriers to this form of banking also stand in the way of the Philippine efforts to tap Islamic financing.

Finance Secretary Carlos G. Dominguez III had earlier floated the idea of issuing sukuk bonds to further diversify the Philippines’ debt profile and access new sources of funding, alongside venturing into the Chinese market via panda bonds.

After over a year of preparations, the Philippines is ready to offer yuan-denominated debt papers to Chinese investors by the first quarter of 2018, awaiting only approval of the People’s Bank of China.

STRONG INTEREST

Overall, there has been “renewed interest” among banks to set up branches in Mindanao – Mr. Duterte’s bailiwick – over the past few years.

BSP’s Ms. Fonacier said the strongest signal that monetary authorities have seen so far is