FROM THE MARGINS
I attended the launching of the book, “Conflict’s Long Game: A Decade of Violence in Bangsamoro,” last July 28. This compendium by Alert International features 10 years of granular evidence on the severity, magnitude, and causes of conflict in Muslim Mindanao. Kudos to the editors, including my good friend, Prof. Francisco Lara, Jr., for this ground-breaking work!
Conflict fuels poverty. Beyond the violence and destruction, conflict has devastating consequences that take decades to recover from. These were my thoughts during the book-launch, as I watched a 17-minute video on the years of conflict in Mindanao. Fueled by political, religious and economic differences, the conflict has fragmented communities, destroyed infrastructure, and undermined the economy and provision of social services. It has pushed many of our Muslim brothers and sisters to extreme poverty.
Muslim poverty
Poverty is both an effect and an underlying cause of conflict. Poverty persists in Muslim Mindanao, based on the results of the 2021 Family Income and Expenditure Survey (FIES). The Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) consistently figured among regions with the highest poverty incidence. Across provinces, Sulu was included in the cluster with high poverty incidence in 2015, 2018 and 2021. Basilan was in the poorest cluster in 2018 and 2021.
The FIES shows a significant reduction in poverty incidence in BARMM, at 29.8 percent in 2021 compared to 54.2 percent in 2018. The intensity of conflict has also gone down from its heights in 2016 and 2017, although violence is yet to return to pre-2015 levels. Still, the subsistence incidence among families in BARMM remains high, at 8.8 percent. This means almost nine out of every 100 families do not earn enough to meet even just their basic food needs. Sulu registered the highest subsistence incidence (17.1 percent), followed by Basilan (16.3 percent). These are high percentages of food-poor families, compared to the country’s overall subsistence incidence of 3.9 percent.
Shariah-compliant financing
It is difficult for Muslim Filipinos to access capital because conventional banking practices are considered haram or forbidden by Islamic law. Islam prohibits interest charging (riba); speculative transactions (gharar); and dealing with haram/sinful things like pork, alcohol and gambling. Without access to much-needed funds for economic activities, poverty is prevalent.
There is only one Islamic bank in the country: the Al-Amanah Islamic Investment Bank. But there are NGOs, cooperatives, and microfinance institutions (MFIs) that serve Muslim communities. The Ramon Magsaysay Awards Foundation and the Peace and Equity Foundation, for instance, joined forces to bring Dompet Dhuafa (DD) to Mindanao. DD is a non-profit organization that won the Magsaysay Award for promoting zakat-based philanthropy in Indonesia. The Center for Agriculture and Rural Development Mutually-Reinforcing Institutions (CARD-MRI), another Ramon Magsaysay awardee, is replicating DD’s Shariah financing model. CARD-MRI’s Paglambo Project has 77,489 client-members in Lanao del Sur, Maguindanao, Zamboanga City, Basilan and Tawi-tawi. ASA Philippines also has a Shariah Finance program with 32 branches and 33,000 clients in BARMM.
It is interesting to note that the loan repayment rate in Shariah financing is very high, ranging from more than 93 percent to 99 percent even at the height of the Covid-19 pandemic. With productive loans, marginalized Muslims are not only able to engage in microenterprises; they can also access educational loans for their children. Since the MFIs’ methodology in accessing financial services is thru center meetings, clients are also given health education, financial literacy and other basic services.
Removing barriers
These are positive gains toward financial inclusion, but hardly enough to meet the needs of the poor in Muslim communities. While the BSP has issued regulations to encourage Islamic banking, the capitalization requirement is similar to universal banks’. This poses difficulties and entry barriers for non-bank financial institutions like regulated NGOs, MFIs, cooperatives, and other organizations. Since these institutions are venturing into Muslim communities unserved by traditional banks, more flexible policies should be adopted to encourage their operations.
Rural banks and microfinance-oriented banks, with systems designed to operate in poor communities in the countryside, are better equipped to serve Muslim communities than universal banks. They should be allowed to establish special branches that operate along the principles of Islamic banking. This way, poor communities can be served without these small banks having to meet the hefty capitalization requirement. The operations of non-bank financial institutions can also be recognized through the issuance of regulations developed especially for Shariah financing.
These are practical solutions in line with BSP’s financial inclusion strategy. The poverty situation in Muslim communities, their financial exclusion, and the distinct character of Shariah financing justify differentiation. After all, the BSP has taken a similarly liberal approach in the case of microfinance, which was started by development organizations but was subsequently integrated in the formal banking system.
We need to push financial inclusion to facilitate peace and development in Muslim Mindanao. Providing Shariah-compliant financial services to Muslim communities will address the deleterious economic effects of Bangsamoro’s half a century of conflict. I agree with the great Nelson Mandela:
“Poverty is not an accident. Like slavery and apartheid, it is man-made and can be removed by the actions of human beings.”
(Dr. Jaime Aristotle B. Alip is a poverty eradication advocate. He is the founder of the Center for Agriculture and Rural Development Mutually-Reinforcing Institutions (CARD MRI), a group of 23 organizations that provide social development services to eight million economically-disadvantaged Filipinos and insure more than 27 million nationwide.)