The Philippine unit of Malaysia’s fifth-largest lender has partnered with Manila’s First Metro Investment Corp. (FMIC) in a test sale looking to exploit the so-called petrodollars of the rich oil-producing Arab countries.
The end goal is to raise initially just a fraction of the money, only $200 million in this case, needed by that area in Mindanao framed as Muslim Mindanao, where the state of infrastructure is not only lacking but abhorrent.
FMIC and Malaysia’s CIMB Bank are seeking regulatory approval for a first-ever sukuk sale, a type of financial instrument akin to a bond, in the country.
FMIC President Roberto Juanchito “Jojo” Dispo said FMIC and CIMB have submitted a proposal to sell sukuk bonds as an alternative method of mobilizing funding for the Philippines.
“We’re looking at initial issue size of $200 million for the sukuk bonds. The partnership is well and alive. We just need approval from the National Treasury, the Department of Finance [DOF] and the Bangko Sentral ng Pilipinas [BSP] Monetary Board clearance. We need to undergo the usual international borrowing-approval process,” he told the BusinessMirror.
Western-style interest-paying bonds are taboo under Islamic finance so a sukuk investor gets to rent the instrument for a preset amount in fees.
Dispo said the sukuk market is very active in terms of mobilizing funding from oil-rich Muslim countries with excess dollars and lend the same to countries that issue the sukuk. “CIMB is the most active underwriter of sukuk in Asean. By partnering with them, it helps the Philippines access the sukuk,” Dispo explained.
“Sukuk are being bought by Muslim retail and institutional investors. We can earn from collecting fees from funding exercise,” he said.
“The proceeds would be for the development of Mindanao in order to push forward this infrastructure. So this [sale] will appeal to Islamic investors because they will effectively be helping their Muslim brothers here,” according to Dispo.
Dispo also said the sukuk would be marketed in the Middle East, particularly to Saudi Arabia investors or Qatar and the United Arab Emirates.
He sees the potentials of Islamic finance in the Philippines which, when fully utilized, should deliver massive benefits to Mindanao.
The Metrobank Group once looked at the moribund government-owned, sharia-lending Al Amanah Bank for a possible purchase but the negotiations went nowhere eventually.