Philippines infrastructure dvelopment can benefit from a diversified source of funding that includes the Sukuk or Islamic bond market, according to the Hongkong and Shanghai Banking Corp. Ltd. (HSBC).
"With the right structure, policies and legal framework to facilitate Sukuk, Islamic finance can be a good infrastructure investment vehicle for emerging markets and developing economies such as the Philippines," HSBC Philippines President and CEO Wick Veloso said in an emailed statement.
Sukuk refers to an "Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia—Islamic religious law," according to Investopedia.
"There is a growing interest in the [Association of Southeast Asian Nations] region to use Sukuk for infrastructure financing and investor appetite remains," Veloso said.
Earlier this year, Finance Secretary Carlos Dominguez III said the government plans to venture into the panda bond market and Sukuk debt papers.
The Philippines intends to spend over P8 trillion on the country's golden age of infrastructure.
Budget Secretary Benjamin Diokno noted the bulk will be financed through tax revenue.
The Philippines has been active in the conventional bond market, but there is only one Islamic bank in the country, the Al Amanah Islamic Investment Bank, HSBC noted, however, that while
"Let us take an example in the Philippines. A country that has a Muslim minority, a very active issuer in the conventional bond market and one Islamic bank, Al Amanah, which has had challenges in being able to grow," it said.
HSBC said there is a need to tap the Sukuk market to be able to access a new pool of investors.
"Given all that context, the story is clear—Islamic finance gives ASEAN nations access to more capital in uncertain times and helps its citizens chart a better future without compromising their values," HSBC Amanah Malaysia Berhad CEO Arsalaan (Oz) Ahmed said.
For its part, the Bangko Sentral ng Pilipinas is advocating for the Islamic Banking Act which will effectively allow Islamic Banks to function without the use of interest rates which is banned under the Shariah law. — VDS, GMA News