Kadtabanga Foundation for Peace and Development Advocates, Inc.
Shariah-based Microfinance as Means for Inclusive and Faith-based Economic Development: How It Can Work in the Bangsamoro?
Islamic finance has been around for about 1,400 years. The birth of Islamic finance took place when the Prophet Mohammad introduced reforms to the economic system of ancient Arabs in the 7th century (Customer Owned Banking Association, 2013). But it has only been in the past four decades that Islamic finance has evolved to become an essential part of today’s financial markets.
In the Philippines, there is a great effort to advocate and implement microfinance. The National Strategy for Microfinance was formulated, envisioning a viable and sustainable micro financial market that will help provide poor households and micro entrepreneurs with greater access to micro financial services. It calls for a greater role of the private sector in providing credit and guarantee programs vis-a-vis the non-participation of government line agencies. Emphasis is on the adoption of market-oriented financial and credit policies to ensure viability and sustainability (Bangko Sentral ng Pilipinas, 2010).
Though microfinance is well defined in the Philippines, the Islamic financing is not well established in the country. In the Muslim majority areas of Philippines and other parts of Asia such as India, Sri Lanka, Brunei, and Cambodia, approximately 20 per cent of the poor cite religious reasons for not seeking conventional microfinance.
The practice of Islamic banking and finance in the Philippines can still be considered as young despite the establishment of Amanah Islamic Bank (first established as Philippine Amanah Bank) in 1973 by virtue of Presidential Decree No. 264.
Recently, there have been visible initiatives of different institutions both in the government and private sector. The National Commission on Muslim Filipinos (NCMF), a government agency mostly in charge of Muslim affairs in the country, expressed that there is plan to explore the opportunities this year to open Islamic Microfinancing. The NCMF said that there are ongoing discussions between the agency and Muslim entrepreneurs.
Despite these efforts, still, only few have availed of the Shariah-based Microfinance. This paper aims, among others, to understand the factors that hamper the full implementation of Shariah-based microfinance.
The project is a research activity aims to understand in general how the Shariah-based Microfinance can kick-off and benefit in the Bangsamoro areas. Specifically:
•Determine the different factors affecting the implementation of Shariah-based microfinance in the Bangsamoro areas
•Determine the challenges and issues hindering the implementation of Shariah-based microfinance in the Bangsamoro areas
•Formulate action plans for the implementation of Shariah based microfinance in the Philippines particularly in the Bangsamoro areas
•Formulate policy papers related to Shariah-based Microfinance for the regional government and national government
•Formulate advocacy plan.