Products | Islamic Bank of the Philippines

Deposits and Investments

1.0 The Al-Amanah Islamic Investment Bank (Islamic Bank)

The Al-Amanah Islamic Investment Bank of the Philippines (Islamic Bank) is chartered government financial institution created by R.A. 6848.Its incorporation stemmed from a felt need to offer the banking public a financial intermediary where banking transactions are carried out under the concept of profit-sharing where it applies, rather then the charging and payment of interest for the use of funds.

2.0 Operations
		2.1 Deposit Features
			2.1.1 Current Deposit
				As with other banks, this account is essentially offered for the safekeeping of your deposits as well as a facility where you can enjoy the instruments of remittances such as checking accounts, payroll services, etc. Withdrawals from this deposit account, including checks drawn for and against it, will be guaranteed and honored by the Islamic Bank, provided your account balances are sufficient to meet such withdrawals.
			2.1.2 Savings Deposit
				This deposit account basically serves the need for the safekeeping of your surplus funds. The Islamic bank guarantees the withdrawal of funds from this account anytime you may wish to do so. If you meet the minimum deposit required under this account, the Islamic Bank may grant a reward on your deposits. Such reward is variable in nature since it is relatively profit-based and is discretionary on the part of the Islamic Bank
			2.1.3 Investment Deposits
				A. General Investment Deposit
				This type of deposit account fulfills your need for a reliable financial intermediary with which to invest your money over a specified period of time. Under this account, the return on your investment deposits is based on actual profits earned by the funds invested net of a reasonable Islamic Bank’s share. This means your funds invested in this account will generate a variable rate of return with potentials for high yielding profit shares instead of the usual fixed return in the form of interest. In short, your money’s worth under this account. The Islamic bank ensures not only the profitability but security of your investment as well because your funds will be rechanelled to inherently-safe investment schemes covering a whole range of financing modalities that is not based on interest capsulized in the following:
				Various forms of capital financing such as deferred sales, leasing &lease purchase transactions where the forms of financing involve fixed assets registered in the name of Islamic Bank. Corporate or Infrastructural projects backed up by the government or corporate reputation & resources as a form of guarantee. Working capital and other forms of trade financing with supporting purchase orders and other trade related instruments such as LCs, etc.
			The Islamic Bank further safeguards your investments and deposits by:
				Placing your funds in selected projects and other enterprises with established track records in business; Diversifying the business exposure of your funds with emphasis on the “strategic pooling of risks “ to cushion the impact of undesired reverses in business; Assigning dedicated, well-trained and viability-oriented personnel equipped with the appropriate business support infrastructures such as strategic databases system, etc.
				B. Special Investment Deposit
				This deposit account is similar in all respects to General Investment Account except that you should meet the required minimum to invest in this account for you to enjoy a unique privilege of deciding on your preferred investment exposure.
			2.1.4 Other Facilities
				In its expanded operations, The Islamic bank will also serve you’re your fund transfers & remittances requirements and other allied facilities such as:
				1. Telegraphic transfers 2. Demand drafts 3. Transfer remittances 4. Forex requirements 5. Automated Interbranch withdrawals, deposits 6. Letters of Credits
		2.2 Investment Features: Financing in the Islamic Bank
			The investment operations of the Islamic bank are replete with various financing schemes that will suit you’re business requirements whether you are a contractor, exporter, importer, manufacturer, merchant, trader, retailer, real estate developer, trucker, warehouser, lessor, or any business enterprise or government corporation/ institution. As such, you may choose from a wide array of financing facilities and services, which include the following:
			2.2.1 Capital or Project Financing

				This scheme is designed particularly for awarded projects that need full financing. Under this arrangement, the client utilizes the funds of the Islamic bank to bankroll the completion of a government or corporate project. In return a pre-arranged share of the profit derived from the project is assigned to the client. The ratio of profit sharing may be tilted in favor of the Islamic bank being the sole financier of the project cost and, in some instances, also the project sourcing party. Funds made available by the Islamic bank under this financing mode are usually used to defray the cost of the real estate and housing development, construction of public roads, ports, markets, buildings, corporate plants, warehouses, and other infrastructural concerns.
				B. Joint-venture project financing This mode of financing serves the need of clients whose available funds are not sufficient to defray the cost of awarded projects. Under this scheme, both the Islamic bank and the client share the capital formation of the venture according to the pre-arranged ratio. Both partners to the venture also agree upon the ratio of profit sharing. This financing arrangement is also applicable to projects mentioned in trustee projects mentioned in Trustee Project Financing. The Islamic bank may or may not participate in the management of the project. The ratio of profit sharing in this case is usually titled in favor of the active or Managing Partner who is usually the client. Clients in both the foregoing project based financing may find working relationship with the Islamic bank convenient and profitable since they may gain access to bank initiated projects as a result of its investment in real estate and building constructions as well as other project sourcing potentials of the bank
				C. Deferred Sales FinancingThis mode of financing caters to the need of clients to acquire assets in the form of real properties such as land and buildings, heavy machineries, transport system warehouses, plants, public markets, ports and other fixed assets. These assets are first purchased or constructed by the Islamic bank upon proposals from prospective clients for purposes of reselling to them on a deferred basis over an agreed profit margin accruing to the bank. The term of the amortization usually ranges from 2 to 10 years depending on the agreement of both parties The deferred sales scheme, usually comes in the form of capital financing and may suit the requirements of:
				Successful manufacturing concern that wishes to expand its production but does not have funds to buy the needed heavy machineries A successful manufacturing concern that wants to expand operations but cannot afford to tie up its working funds to defray expansion cost such as the acquisition of land, construction of plants, etc. A successful retail establishment that aims to expand operations resulting in need of capital financing to defray the cost of say, a commercial complex The expanding thrust of successful hotels, condominiums and the like; Enterprising and profitable real estate developers; A successful leasing firm wishing to acquire fixed assets Self liquidating projects of governments corporations, institutions, and other project initiators Eligible individuals wanting to own residential assets
				D. Lease FinancingThis mode of financing addresses the need of clients who wish to avail usage of an asset on a lease basis. Under this arrangement, the client requests the Islamic bank to provide him a certain asset for his use. In return he obligates himself to lease the asset concerned over a specified period of time allowing the Islamic bank to earn a certain profit margin after the total periodic amortizations shall have been collected at the expiration of the contract. The lease term may vary from 2 to 10 years depending on the nature of asset and the agreement reached. Lease financing may suit the business requirements of :
				A manufacturing concern that aims to avail itself the convenient usage of a plant, warehouse, commercial buildings and other machineries and equipment on a rental basis A trading concern that wishes to avail itself the convenient usage of a warehouse or commercial buildings and sites on a lease rental basis Government units or institutions that want to avail themselves the convenient usage of land or buildings on a lease / rental basis Eligible tenants or corporate firms who wishes to avail themselves of a condominium type residences or offices on a lease/ rental basis
				E. Lease purchase financing A manufacturing concern that aims to avail itself the convenient usage of a plant, warehouse, commercial buildings and other machineries and equipment on a rental basis Government units or institutions that want to avail themselves the convenient usage of land or buildings on a lease / rental basis Eligible tenants or corporate firms who wishes to avail themselves of a condominium type residences or offices on a lease/ rental basis
			2.2.2 Working Capital or Trade Financing
				A. Working Capital FinancingThis mode of financing is offered to clients who need working capital on a relatively short-term basis to manufacture or buy goods or commodities for reseller purposes. Under this scheme, the Islamic bank buys certain commodities requested by clients who by presenting trade instruments such as purchase orders, LCS and other attendant proof of trading transactions, establish the existence of a ready market for the goods requested. The eventual repayment of the financing exposure includes in a prearranged mark-up for the Islamic bank. Working capital financing caters to domestic transactions only.
				B. Working Capital LC
				This mode of trade financing is provided fully in the form of an LC instrument negotiated from foreign countries as requested by an eligible client. The total importation cost plus a pre-arranged mark-up is then repaid to the Islamic bank upon resale of the imported commodity. This is granted only to clients who are eligible as contained in the conditions set forth in letter A.
				C. Jointly Funded LC
				This mode of financing applies when the funds of a prospective client wishes To import a certain commodity are not enough to absorb the total importation cost. Both the Islamic bank and importer share the total cost of the LC needed to buy the imported commodity. Both parties share in the profit that will be derived from the resale of the imported commodity based on a pre-arranged ratio.
PRIMER Frequently Asked Questions GENERAL INFORMATION What is the Al-Amanah Islamic Investment Bank of the Philippines? How was the Islamic Bank Incorporated? What is the primary objective of the Islamic Bank? What is Islamic Banking? How does Islamic Banking differ from traditional banking? What is an Islamic Bank? What is meant by the term “Ämanah”? What is “interest-free” banking? What then takes the place of interest in Islamic banking? What is the Capital Structure of the Islamic Bank? Who are the shareholders of the Islamic Bank? Who compose the Islamic Bank’s Board of Directors? What is the Shariah Advisory Council? Who compose the Shariah Advisory Council of the Islamic Bank? How does the Islamic Bank contribute to the socio-economic amelioration of the Muslims? Does the Islamic Bank also service the banking and credit requirement of non-Muslims? AND PROCEDURES I. ON CLIENTS DEPOSITS What are the types of deposits the Islamic Bank accepts from clients? Who may open and maintain Current Accounts? How is Savings Account treated? Who may open General Investment Account? How does the Islamic Bank consider the General Investment Account? How is Special Investment Account Operated? II. ON PROJECT FINANCING How does the Islamic Bank participate or provide its customers financing on their project or requirements for asset acquisition? How is the project financing under Al-Mudarabah principle undertaken? How is project financing under Al-Musharaka principle treated? How is Assets Acquisition Financing undertaken under the principle of Al-Bai Bithaman Ajil? How does the Islamic Bank undertake financing for the use of services of assets under the principle of Al-Ijarah? How does the Islamic Bank considers financing for the use of services and subsequent acquisition of assets under Al-Bai ul-Takjiri principle? How does the Islamic Bank offer the Al-Qardh ul-Hasan facility? III. ON TRADE FINANCING How does the Islamic Bank provide working capital financing for its clients? What are the types of facilities/ financing provided by the Islamic Bank for its clients? When are these facilities/financing granted to customers? How is letter of credit facility under the principle of Al-Wakalah (agency) provided? How is letter of Credit financing provided under Al-Musharaka principle? How is Letter of Credit facility under the principle of Al-Murabaha (Cost-plus; Mark-up) provided? How is Working Capital Financing provided under the principle Al-Murabaha? IV. ON OTHER SERVICES What are the services the Islamic Bank provide for its customers?
	Q. What is the Al-Amanah Islamic Investment Bank of the Philippines? The Al-Amanah Islamic Investment Bank of the Philippines, herein referred to as Islamic Bank, is an Islamic financial institution created under Republic Act No. 6848. Q. How was the Islamic Bank Incorporated? The Islamic Bank has been incorporated by a legislative fiat (R.A. 6848) as a chartered government financial institution on January 26, 1990 taking on the name of Äl-Amanah Islamic Investment Bank of the Philippines” with principal domicile and place of business at Zamboanga City.Q. What is the primary objective of the Islamic Bank? The corporate objective of the Islamic Bank is to provide banking facilities and services to Filipinos in general, and Muslim Filipinos in particular in accordance with Islamic commercial law. Q. What is Islamic Banking? Islamic Banking is a system of financial intermediation carried out in accordance with Islamic financial principles. Q. How does Islamic Banking differ from traditional banking? The major departure of Islamic banking from conventional banking is the prohibition of pre-determined fixed returns for the use of money commonly referred to as interest. The former regards profit as the backbone of its operation; the latter considers interest as the kingpin of its system. Q. What is an Islamic Bank? An Islamic Bank is a financial institution which conducts its operations in accordance with Islamic principles, rules and practices. Q. What is meant by the term “Ämanah”? “Amanah” is the Islamic word for “trust”. The term has to do with the view that the world’s resources belong to Allah (GOD) and are merely held in trust by Man. Q. What is “interest-free” banking? “Interest-free” banking is one that forbids the payment and receipt of interest (Al-Riba). Q. What then takes the place of interest in Islamic banking? In Islamic banking, profit assumes the place of interest in conventional banking. Q. What is the Capital Structure of the Islamic Bank? The Islamic Bank’s authorized capital is “one billion pesos (P1,000,000,000) divided into ten million par value shares of one hundred pesos each” categorized as follows: Series “A” shares comprising five million one hundred thousand shares equivalent to five hundred ten million pesos (P510,000,000); Series “B” shares comprising nine hundred thousand shares equivalent to ninety million pesos (P90,000,000); and Series “C” shares comprising four million shares equivalent to four hundred million pesos (P400,000,000). Q. Who are the shareholders of the Islamic Bank? The shareholders of the Islamic Bank shall be composed of the following: Stockholders of the former Philippine Amanah Bank, namely: The National Government and such other financial entities as it may designate, to subscribe Series “A” shares; Filipino individuals and institutions to subscribe Series “B” shares; and Filipino and foreign individuals and/or institutions or entities to subscribe Series “C” shares. Q. Who compose the Islamic Bank’s Board of Directors? The Board of Directors shall be composed of nine (9) members duly elected in a General Stockholders’ meeting. The Board shall be headed by a Chairman who shall act as the Chief Executive Officer chosen from among the members thereof. Q. What is the Shariah Advisory Council? The Shariah Advisory Council is a non-organic council of the Islamic Bank that offers advice and undertakes reviews pertaining to the application of the principles and rulings of Shariah to the Islamic Bank’s transactions. Q. Who compose the Shariah Advisory Council of the Islamic Bank? “The Shariah Advisory Council of the Islamic Bank shall be composed of not more than (5) members, selected from among Islamic scholars and jurists…” Q. How does the Islamic Bank contribute to the socio-economic amelioration of the Muslims? The Islamic Bank hopes to achieve the noble objective “by performing banking, financing and investment operations” and by establishing participating “in agricultural, commercial and industrial ventures based on the Islamic concept of banking.” Q. Does the Islamic Bank also service the banking and credit requirement of non-Muslims? Yes. The Islamic Bank shall cater to the business requirements of both Muslims and Non-Muslims alike so long as the Bank’s manner of operations is accepted by them.
AND PROCEDURES
	I. ON CLIENTS DEPOSITS

Q. What are the types of deposits the Islamic Bank accepts from clients?
The Islamic Bank accepts deposits from its clients through four (4) types of accounts;

Current Account
Savings Account
General Investment Account
Special Investment Account

Q. Who may open and maintain Current Accounts?
Any qualified individual, organization or entity looking for safe custody of their funds and absolute convenience in their use may open and maintain Current Accounts with the Bank under the principle of Al-Wadiah (Safe-custody).

Q. How is Savings Account treated?
Under Al-Wadiah principle, the Islamic Bank:

Accepts deposits from its clients looking for safe custody and a degree of convenience in the use of their funds in the form of Savings Accounts under the principle of Al-Wadiah (Safe-custody).
Requests permission from such depositors to make use of their funds so long as the funds remain with the Bank.
Claims ownership over all profits derived from the use of such funds, albeit the Bank, at its absolute discretion, may reward the customers by returning a portion of the profits, if any, from time to time.
Guarantees withdrawal of refund of a part or the whole of their balances wherever they so desire.
Provides its customers with Savings Pass Book and other related facilities offered in Savings Account.

Q. Who may open General Investment Account?
Any qualified individual, organization or entity looking for investment opportunities for their funds under the principle of Al-Mudarabah (Trust partnership).

Q. How does the Islamic Bank consider the General Investment Account?
Under the principle of Al-Mudarabah, the Islamic Bank:

Accepts deposits from its customers looking for investment opportunities.
Specifies with the customer the period of investment. At its full blast operations, the Bank may intend to accept investment deposits for the following period.
- 1 month 1 year
- 3 months 1 1/2 years
- 6 months 2 years
- 9 months 4 years and over
Acts as the “entrepreneur” and agrees with the “provider of capital”, among others, on the ratio of profit distribution between them and on how to distribute such profit, if any, generated by the Bank from the investment of funds.
Manages solely the investment of funds but the customers bears all legitimate losses in the investment. In the case of the Islamic Bank, R.A. 6848 requires the Bank to set up an “Investment Risk Fund” as an internal reserve for this purpose.

Q. How is Special Investment Account Operated?
In addition to the foregoing facilities, the Islamic bank considers the following:

The Bank may selectively accept deposits from the government and corporate customer in the form of Special Investment Accounts under the principle of Al-Mudarabah (Trust partnership).
The modes of investment of the funds and the ratio of profit distribution may usually be individually negotiated. Initially however, the account will not be available in the Islamic Bank.

II. ON PROJECT FINANCING

Q. How does the Islamic Bank participate or provide its customers financing on their project or requirements for asset acquisition?
Under various Shariah principles, the Islamic Bank participates in or provides financing for the projects or asset acquisition of its clients in several modes. Presently, the Bank’s financing activities are being offered to its customers under the following principles:

Al-Mudarabah (Trustee Project Financing)
Al-Musharaka (Joint-Venture)
Al-Bai Bithaman Ajil (Deferred Sale)
Al-Ijirah (Leasing)
Al-Bai ul-Takjiri (Leasing ending in ownership)
Al-Qardh ul-Hasan (Benevolent Loan)

Q. How is the project financing under Al-Mudarabah principle undertaken?
Under the principle of Al-Mudarabah, the Islamic Bank undertakes trustee project financing in the following manner:

The Bank finances acceptable and viable projects of its customers.
In this instance, the Bank is the “provider capital” and will provide 100% financing required for the project while the initiator of the project is the “entrepreneur”.
The Bank cannot interfere in the management of the project, but has the right to undertake follow-up and supervision tasks.
Both parties negotiate and agree on the ratio of distribution of the profits, if any, generated from the project.
In case of legitimate loss in the project, the Bank shoulders all the losses.

Q. How is project financing under Al-Musharaka principle treated?
The Islamic Bank treats project financing under the principle of Al-Musharaka in the following considerations:

The Bank finances acceptable or feasible project under the principle of joint-venture project financing.
In this case, the Bank together with the initiators of the project will provide the whole financing for the project in agreed proportion.
All parties, through negotiation, agree on the distribution ratio of the profits derived from the project, if any. However, such ratio need not coincide with the ratio of the participation in the financing of the project.
All parties, including the Bank, have the right to participate in the management of the project, but they may opt to waive such right.
In the event of loss in the project, all parties bear the loss in proportion to the ratio of their capital contribution.

Q. How is Assets Acquisition Financing undertaken under the principle of Al-Bai Bithaman Ajil?
Under the principle of Deferred Sale, the Islamic Bank

Finances its customers who wish to acquire a given asset but to defer the payment of such asset for a specific period of time.
Determines the requirements of the client in relation to his period and manner of repayment.
Purchases the asset concerned.
Subsequently sells the asset to the customer at an agreed price which normally comprises:
- the Bank’s margin of profits
Allows the clients to settle the payment by installments within the specific period and manner so agreed.

Q. How does the Islamic Bank undertake financing for the use of services of assets under the principle of Al-Ijarah?
The Islamic Bank undertakes financing for the use of services of assets in the following modes:

The Bank may finance its clients to acquire the right to use the services of a given asset under the principle of Al-Ijarah.
The Bank first purchases the asset required by the clients.
Subsequently, the purchased asset will be leased to the customers for a fixed period subject to the terms and conditions as agreed upon by both parties.

Q. How does the Islamic Bank considers financing for the use of services and subsequent acquisition of assets under Al-Bai ul-Takjiri principle?
The Islamic Bank considers financing for the use of services of an asset and its subsequent acquisition in the following manner:

The Bank may finance its customers who initially wish to acquire the right to use the services of a given asset under the principle of Al-Bai ul-Takjiri.
The Bank purchases the asset required by the customers.
Subsequently the Bank leases the asset to the customer for a specific period of time.
Both parties agree that at a point the client will purchase from the Bank the asset concerned at an agreed price with all the lease rentals previously paid constituting part of such a price.

Q. How does the Islamic Bank offer the Al-Qardh ul-Hasan facility?
In discharging its social responsibilities, the Islamic Bank observes the following:

The Bank may use an appropriate portion of the funds at its disposal to extend loans to deserving customers under the principle Al-Qardh ul-Hasan.
The loan may be granted only to truly deserving customers for worthy economic projects.
The borrower is obliged to repay only the principal amount of the loan according to its terms and conditions.
The Bank cannot demand from the borrower to pay anything over and above the principal amount of the loan, although in Shariah, it is desirable that he does so at his own will.

III. ON TRADE FINANCING

Q. How does the Islamic Bank provide working capital financing for its clients?
The Islamic Bank provides specific facilities on trade financing mostly on short-term basis by extending working capital and trade financing facilities to its clients.

Q. What are the types of facilities/ financing provided by the Islamic Bank for its clients?
Presently, the Islamic bank provides two (2) types of facilities/financing, namely:

Letter of Credit under Al-Wakalah, Al-Musharaka, and Al-Murabaha principles.
Working Capital financing under the principle of Al-Murabaha (Cost-plus; Mark-up).

Q. When are these facilities/financing granted to customers?
These facilities are granted to customers in connection with the purchase/import and sale/export of goods and machineries, and the acquisition and holding of stocks and inventories, spares and replacements, raw materials and semi-finished goods.

Q. How is letter of credit facility under the principle of Al-Wakalah (agency) provided?
In providing this facility, the following are observed:

The client concerned informs the Bank of his Letter of Credit requirements and requests the Bank to provide the facility.
The Bank requires the client to place a deposit to the full amount of the price of goods to be purchased/imported which it accepts under the principle of Al-Wadiah.
The Bank establishes the Letter of Credit and pays the proceeds to the negotiating bank utilizing the client’s deposit, and subsequently releases the pertinent documents to the client.
The Bank charges the client fees and commissions for its services under the principle of Al-Ujr-wal-Umulah.

Q. How is letter of Credit financing provided under Al-Musharaka principle?
The following are observed in providing for the Al-Musharaka financing:

The customer informs the Bank of his Letter of Credit requirements and negotiates the terms and conditions of joint-venture financing.
The customer places a deposit for his share of the cost of goods to be purchased/imported as per Al-Musharaka agreement with the Bank accepts under the Al-Wadiah principle.
The Bank establishes the Letter of Credit and pays the proceeds to the negotiating bank utilizing the customers deposit together with its own share of financing, and eventually releases the pertinent papers to the customer concerned.
The customer takes possession of the goods and disposes these off in the manner so agreed upon.
The Bank and customer share in the profit from the venture as provided for in the agreement.

Q. How is Letter of Credit facility under the principle of Al-Murabaha (Cost-plus; Mark-up) provided?
The Letter of Credit under Al-Murabaha is provided through the following schemes:

The client informs the Bank of his Letter of Credit requirements and requests the Bank to purchase/import the goods indicating thereby that he would purchase the goods from the Bank on their arrival under the principle of Al-Murabaha.
The Bank establishes the Letter of Credit and pays the proceeds to the negotiating funds using its own funds.
The Bank sells the goods to the client at a price comprising its cost and profit margin for settlement by cash or on a deferred basis in accordance with Al-Murabaha principle.

Q. How is Working Capital Financing provided under the principle Al-Murabaha?
Working Capital Financing under Al-Murabaha principle is provided in the following manner:

The customer requests the Bank to provide financing for his working capital requirements by purchasing stocks and inventories, spares and replacements, raw materials or semi finished products under the principle Al-Murabaha.
The Bank purchases or appoints the customer as its agent to purchase the required goods utilizing its own funds.
The Bank subsequently sells the goods to the customer at an agreed price on a mark-up basis.
The Bank allows the customer to settle the sale price on a deferred term 30 days, 60 days, 90 days or any other period as may be agreed upon between the parties.

IV. ON OTHER SERVICES

Q. What are the services the Islamic Bank provide for its customers?
The Islamic Bank also provides other banking services under various rules of Shariah. Presently, the Bank provides for its customers the following services.

Remittances and Transfers
Sale and purchase of foreign currency
Sale of Traveler’s Cheques
Investment/Portfolio Management
Trustee and Nominee Company Services.