Microfinancing in BARMM less risky— ASA PH

Published April 26, 2021, 1:17 PM

by Bernie Cahiles-Magkilat

Micro financing in the Bangsamoro Autonomous Region of Muslim Mindanao (BARMM) has lower risks with higher repayment rate, according to data from microfinancing firm  ASA Philippines. 

Ferdinand U. Jikiri, senior director of ASA Philippines Foundation Inc., said at the virtual conference on “Delivering Islamic Microfinance in BARMM: The Experience of ASA Philippines Foundation” that its financing portfolio as of March 31, 2021 has reached P23.349 billion of which BARMM accounted for P540.882 million only.

Photo credit: https://www.facebook.com/asaphilippines/

But in terms of risks, data showed that BARMM has lesser portfolio risk at only 6.23 percent compared to 8.25 percent of the ASA Philippines based on their outstanding portfolio.

In terms of payment, ASA’s exposure in the Muslim Mindanao has a higher repayment rate of 87.13 percent as against 84.91 percent outside of BARMM. 

“Therefore, based on our experience the notion that there is higher risk of conducting Islamic micro finance environment is actually not true,” said Jikiri.

To date, ASA has 32 branches in BARMM run by 135 micro finance officers and 186 staff.  

In addition, Jikiri pointed out that 50 percent of portfolio in BARMM come from borrowers’ savings. ASA’s mother institution is not also taking back all BARMM generated funds to enable branches to operate independently. 

In cases some of its BARMM branches are in need of funding, ASA will give out cash advances but not necessarily credit or loan.

In the same event, DTI Undersecretary Abdulgani M. Macatoman said Muslims in this country are in dire need of access to investable funds for development of their small businesses.

Because of that Muslims are divided between two worlds of access to financing funds.  There are those, who by extreme necessity, are participating in the Western financing method.  But a vast number of Muslims simply prefer to stay away from “riba”, even if it means missing opportunities for enhancing the growth of their businesses. As a result, Macatoman said this increases the low participation rate of Muslims in the financing market. 

“The Philippines also recognizes the vital role of Islamic banking and finance in creating opportunities for greater financial inclusion especially for the underserved Muslim population, in expanding the funding base for small and medium-sized enterprises as well as large government infrastructure through financial arrangements with risk sharing as their core element, and in contributing to financial stability through the use of financial contracts and services that are founded on risk sharing rather than speculation in compliance with Shari’ah principles.

On August 22, 2019, Republic Act 11439: An Act Providing for the Regulation and Organization of Islamic Banks was signed into law.

“But as the Islamic finance is new in the country, the breaking of the ice, so to speak, is much harder,” he said.

This is because as of this time, he said, there is no existing real Islamic finance that can probably pass the scrutiny of trusted religious leaders who are familiar with Islamic finance.  Although the country can boast of having used the word Islamic bank in the world, Macatoman said is there is no world recognition as such because we only used the name but we do not have the real Islamic bank, accepted as such,” he added.  

 “Just as in Islamic finance, by mere use of this name and the Islamic financing services that follows, its credibility will not be automatic amidst the background of inability to develop a truly Islamic bank after 50 years of attempt,” he noted.

 As such, Islamic finance and its management rely on indigenous professional support.

The need for microfinancing is also expected to further rise especially with the  potential contribution of Halal industries in the country under Republic Act 10817: An Act Instituting the Philippine Halal Export Development and Promotion Program, Creating for the Purpose the Philippine Halal Export Development and Promotion Board, and for Other Purposes. The law strengthened the direction of the Philippines to promote the growth and ensure the integrity and quality of Philippine Halal exports. With the internationalization of markets brought about by globalization and economic integration, and mindful of the state’s commitment under international trade agreements including multilateral and bilateral mutual recognition agreements, Macatoman said harmonization of standards to international standards and compliance to standards of Halal products, processes and services become indispensable.