AL-AMANAH Islamic Investment Bank of the Philippines (AAIIBP) will extend financing to local government units (LGUs) next year beyond its traditional borrowers to close the gap in basic public services.
AAIIBP Chairperson and Chief Executive Officer Amenah F. Pangandaman announced in a forum that the state-owned Islamic bank will initially focus on Mindanao and eventually expand the program nationwide, according to a news release.
‘We all know that Mindanao’s LGUs have long faced underfunding and infrastructure deficits compared to the rest of the nation,’ Pangandaman said. ‘By providing the support and investment these communities deserve, we can close the gap in basic public services and pave the way for a sustainable climate-resilient future.’
AAIIBP plans to bankroll revenue-generating projects such as hospitals and health facilities, water systems, public markets and slaughterhouses, cold storage facilities, transport terminals and solar and power generation facilities.
It will also support service-enhancing projects including heavy equipment, farm-to-market roads and bridges, municipal halls and capitol buildings, school buildings and convention centers, solid waste management facilities and real property tax collection systems.
All provinces, cities, municipalities and barangays may apply provided that they have balanced or surplus actual income for the last three years and have maintained efficient collection of real property and other local taxes with steady growth over the same period.
Priority will also be given to LGUs that designate AAIIBP as their national tax allotment depository.
‘Every time we make one LGU financially sustainable, we are getting one step closer to a country that is economically-resilient and truly self-reliant,’ Pangandaman said.
While LGU development plans are ready with annual budgets funding them one year at a time, Pangandaman said providing financing can expedite projects with payment matched to the revenue the project itself generates.
The bank plans to structure financing around the revenue cycle of an LGU or the project being financed, rather than requiring repayment on a fixed calendar, Pangandaman added.
‘At Al-Amanah, we do not lend money and charge for its use. Instead, we build, buy, or lease the actual asset the LGU needs, then is paid for that asset at a price fixed in advance,’ she said.
‘We have no riba (unjustified excess), as all transactions are structured to be free of interest in any form. There is no floating rate as the profit or rental rate is fixed for the entire term and does not change. Lastly, the total cost will be agreed upon and disclosed to the LGU before signing,’ she added.
The bank currently provides Shariah-compliant financing to individuals, agricultural workers, cooperatives and micro, small and medium enterprises.