PHL may ven­ture into sukuk bonds

BusinessMirror - - Front Page - By Ty­rone Jasper C. Piad

WITH a large fund­ing needed for the country’s mas­sive in­fra­struc­ture drive, Moody’s Investors Ser­vice said the Philip­pines might po­ten­tially ven­ture into sukuk is­suance, es­pe­cially af­ter pass­ing an Is­lamic fi­nance and bank­ing law.

The Bangko Sen­tral ng Pilip­inas (BSP) signed Cir­cu­lars 1069 and 1070—which cover the es­tab­lish­ment of Is­lamic banks and the ap­proval of the Shariah Gov­er­nance Frame­work—be­fore 2019 ended to en­sure com­pli­ance to bank­ing re­quire­ments.

Repub­lic Act 11439 or “An Act Pro­vid­ing for the Reg­u­la­tion and

Or­ga­ni­za­tion of Is­lamic Banks” was signed into law in Au­gust last year, which BSP wel­comed as this could boost Is­lamic fi­nanc­ing and in­clu­sive growth.

“This po­ten­tially paves the way for the gov­ern­ment’s first foray into the sukuk mar­ket against a back­drop of higher fund­ing needs due to its ag­gres­sive in­fra­struc­ture devel­op­ment pro­gram,” Moody’s said in a re­port on Thurs­day.

Sukuk is an Is­lamic fi­nan­cial in­stru­ment that com­plies with Is­lamic re­li­gious law. Pro­ceeds from the is­suance of sukuk are al­lo­cated for as­set ac­qui­si­tion, which each in­vestor holds par­tial own­er­ship.

The am­bi­tious Build, Build, Build pro­gram of the gov­ern­ment is aimed at im­prov­ing the country’s in­fra­struc­ture and con­nec­tiv­ity while boost­ing the con­struc­tion in­dus­try with higher spend­ing and more job op­por­tu­ni­ties. The Philip­pines re­cently se­cured at least $3.3 bil­lion in loans from the Asian Devel­op­ment Bank, half of which will be used to fi­nance the pro­gram.

BSP Gov­er­nor Ben­jamin Dio­kno re­cently said that three con­ven­tional banks ex­pressed in­ter­est in es­tab­lish­ing Is­lamic bank­ing units. While the Cen­tral Bank did not pro­vide names, it noted that these were two lo­cal banks and one for­eign bank.

The po­ten­tial mar­ket for Is­lamic fi­nan­cial instrument­s is seen

to be dom­i­nated by Mus­lims, who com­prise 10 per­cent of the country’s pop­u­la­tion.

Moody’s added that the BSP’S ini­tia­tives to­ward Is­lamic bank­ing and fi­nanc­ing could “widen ac­cess to fi­nan­cial ser­vices to the country’s Mus­lim mi­nor­ity pop­u­la­tion.”

Mod­est growth

GLOB­ALLY, Moody’s is see­ing a “mod­est” growth in terms of longterm sov­er­eign sukuk is­suance this year due to higher fi­nanc­ing re­quire­ments.

“Greater bor­row­ing needs re­flect the im­pact of the re­cent plunge in oil prices, amid the global eco­nomic down­turn re­sult­ing from the coro­n­avirus out­break,” Moody’s said.

Sukuk is­suance might rise to $75 bil­lion in 2020 from $71 bil­lion last year, Moody’s Se­nior Vice Pres­i­dent Chris­tian de Guzman said. “We ex­pect that wider fis­cal deficits, larger sched­uled re­pay­ments and a deep­en­ing of do­mes­tic Is­lamic fi­nan­cial mar­kets will lead to higher sukuk is­suance over the com­ing years,” he added.

Bulk of the sukuk is­suance this year is ex­pected to come from Saudi Ara­bia, Qatar, Malaysia, In­done­sia and Tur­key.

How­ever, Moody’s said that long-term sukuk is­suance might slump to $70 bil­lion in 2021 be­cause of lower fi­nanc­ing needs fol­low­ing the ex­pected surge this year.


DE­SPITE a gov­ern­ment or­der for peo­ple, es­pe­cially the old ones, to stay home dur­ing the en­hanced com­mu­nity quarantine, a woman is seen on Thurs­day on Edsa with her wheel­chair.

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