By Abdel Aziz Dimapunong
Chancellor, Islamic Banking Research Institute
Founding chairman, Amanah Islamic Bank
Last October 2006, I wrote a blog about the founders of Islamic banking based on documented records compiled by the Islamic Banking Research Institute. The research covers historical background of pioneering Islamic banks as well as their founders. These are existing and operational Islamic banks and Islamic financial institutions that were founded in the early 1970s. In the world of Islamic banking, their founders are well known. They were listed by the Institute as composing of only two types: individuals and governments. The individuals are composed mainly of three personalities, the “Bankers Par Excellence”, namely: His Highness, Prince Muhammad Faisal Al Saud of the Faisal chain of Islamic banks, His Excellency, Saleh Abdullah Kamel of the Al Baraka group of banks, and His Excellency, Ahmad Muhammad Ali, president of the Islamic Development Bank. The multi-lateral organization that is otherwise known as the Organization of Islamic Conference was the founder of the Islamic Development Bank whose president from the start has been Dr. Ahmad Mohammad Ali.
It has been suggested by one Grande Dianaton, incumbent chairman and chief executive officer of the Amanah Islamic Bank, that the late Senator Mamintal A. Tamano be considered as among the founders of Islamic banking. This is also the view of Datu Muamar Badio, former chairman of the said bank. Of late, I also received some email messages that echoes the same opinion as that of Dianaton and Badio. The Institute then reviewed its research on the founders of Islamic banking. After some reflections, we consider the late Senator Mamintal A Tamano as among the founders of Islamic banking.
The late Senator started to conceptualize a Muslim bank in the Philippines as early as 1971. That was the time Islamic banking was in its infancy stage. Although some scholars claimed that Islamic banking started in the late 1950s, others insisted that it actually goes back to the sixties. But it is quite popular to claim that it was only in 1972 that stable Islamic banks were established in Egypt. They were the Nasser Social Bank of Egypt and the Faisal Islamic Bank of Egypt.
The concept of a Muslim bank by Senator Mamintal Tamano was later to become the Philippine Amanah Bank that was created by Presidential Decree No. 124. This bank existed from 1973 to 1989. It was the precursor of what is now the Al Amanah Islamic Investment Bank of the Philippines created under Republic Act No. 6848. Senator Tamano played a key role in the establishments of these two banks in the Philippines.
The birth of a Muslim leader
Mamintal Tamano was born in Tamparan, Lanao Del Sur on December 25, 1928. He finished his secondary course at Lanao High School as valedictorian. He graduated Bachelor of Arts in 1952 and Bachelor of Laws in 1953 both at the University of the Philippines, the premier institution of higher learning in the country.
On 31 May 1958 Senator Mamintal Tamano was married to Putri Zorayda Abbas with whom he had nine children. Mamintal Tamano, as a lawyer became Justice of the Peace in the province of Lanao.
Tamano’s marriage life did not stop him to pursue higher education in law. In 1958, he was graduated Master of Laws at the Cornell University, U.S.A. When he returns home, he entered the political arena. He was elected vice-governor for ten years from 1959 to 1968 in the province of Lanao del Sur.
After being a vice governor, Mamintal Tamano was appointed as Commissioner of the Commission on National Integration, a cabinet rank in the Marcos administration. The Commission provides study scholarship to deserving members of the cultural minority groups. They usually belong to the poor but belonging to the upper 15% of the graduating class in high school. Tamano was Commissioner until 1969 when he filed his candidacy for senator. It was this time that I met the then Commissioner Tamano, only months before he became a senator. I served as volunteer to his campaign headquarters at Syquia Apartments until the election was over. Fortunately, he was elected senator. I was among the employees of his office until the Senate was abolished and Martial Law was declared by President Ferdinand Marcos.
In the Philippines where the Muslims were in the minority, it was a rarity for a Muslim to be elected senator. The Philippine Congress has a limited record on Muslim representation in its chamber. Under the American regime, the Senate first elected in 1941 a Muslim sultan by the name of Alauya Alonto. When sovereignty was handed back to the Philippines in 1946, two senators were elected in the First Congress, namely: Alonto and Salipada Pendatun. The Second Congress had no Muslim senator. In 1955 Domocao Alonto, son of Sultan Alauya Alonto, was elected to the Senate to serve in the Third and Fourth Congress. Again, there was no Muslim senator in the Fifth and Sixth. It was on the Seventh Congress that Mamintal Tamano was elected during the 1969 election. In the Eighth Congress two Muslims were elected after the end of Martial Law. They were Mamintal Tamano and Santanina Rasul.
Conceptualizing the Philippine Amanah Bank
As a legislator during his first term, Senator Mamintal Tamano intended to sponsor a bill for the passage of a charter of what he initially called as the Philippine Muslim Bank (PMB). I was then a working student, and I was a registered employee of the Senate under the Office of Senator Tamano, then chairman of the Senate Committee on Banks and Currencies. And I was privileged to have typewritten Tamano’s drafted bill for the charter of PMB. This draft did not materialize into a law because just as soon as the proposed charter was drafted, martial law in the Philippines was declared by Pres. Ferdinand Marcos. The entire Congress (includes the Senate) of the Philippines was abolished.
In later part of 1972, Senator (this time already ex-Senator) Tamano made some revisions to the proposed charter. The name was changed from Philippine Muslim Bank to Philippine Amanah Bank. The draft format was changed into a presidential decree format without a trace to Tamano. The Senator asked me to deliver the draft to a member of the Marcos cabinet who was among his close friends. I delivered the final draft to Tamano’s friend in the Palace. The following year it became the Presidential Decree No. 264, otherwise known as the Charter of the Philippine Amanah Bank.
The early seventies was the age of the oil phenomenon. Enthusiasm on Islamic banking shifted from Egypt to Saudi Arabia. The pioneering Islamic banker was HRH Prince Mohammed al Faisal Al Saud. To his credit, the Islamic Development Bank of Jeddah, Saudi Arabia was established. He was also the founder of the Faisal chain of Islamic banks and financial institutions. Among these were: the Faisal Islamic Bank of Egypt, Faisal Islamic Bank of Sudan, Faisal Islamic Bank of Kibris, Masraf Faisal Al Islami Bahrain, Masraf Faisal Al Islami Niger, Masraf Faisal de Guinea, Masraf Faisal de Senegal, Islamic Finance House, Faisal Finance Institution (Istanbul), and the Dar Al Maal Al Islami in the Bahamas. Another Islamic banker from Saudi Arabia was Sheikh Saleh Abdullah Kamel, a prominent businessman, and founder of the Al Baraka Group of companies. He was very closely related to Prince Faisal Al Saud. Sheikh Kamel was also a founder of a chain of Islamic financial institution. Among them were: the Al Baraka Al Sudani, Al Baraka Bank Bahrain, Al Baraka Turkish Finance House in Istanbul, Al Baraka Islamic Bank Mauritania, Al Baraka Investment Company in London, Al Baraka Finance House in London, Al Baraka International in London, and Al Baraka Banking Corporation in Houston, Texas.
Our Philippine Amanah Bank was followed in 1975 by the first Islamic bank in the Middle East which was chartered in the United Arab Emirates. That was the Dubai Islamic Bank.
In the 1970s, there was no clear legal definition of what Islamic banking means. At least, this was the case in the Philippines. Sharia’ counsels were not popular then. In the Philippines, Islamic banking was not even mentioned in the General Banking Law or the Central Bank Act. There was no reference to Islamic banking. There were no rules and no regulation specific for Islamic banking. People simply thought that by being called Amanah bank, Al Amanah Bank, or any Arabic named bank with Moslem officers and holding branches in predominantly Muslim areas, such a bank could already be branded as an Islamic Bank.
In the 1980s, the Ulama counsels (i.e., the Islamic scholars) were already complaining about misleading the general public, making them believe that the Amanah Bank was Islamic Bank. They insisted that charging interest is violative of Islamic tenets. So, in 1986 the Majlis Da’wah Philippine Al Islami was formally organized by then Mohammad Mauyag Tamano, then Philippine Ambassador to Saudi Arabia. One of the objectives of this organization was to clamor for the establishment of a truly Islamic Bank in the Philippines. That means banking sans interest rates. This organized move was partly inspired by Malaysia’s successful passage in 1983 of its Islamic Bank Act 1983, and by the eventual establishment of the Bank Islamic Malaysia Bhd on July of that year. This bank was designed to cater for the banking of Malaysia’s predominantly Muslim population who perceive the western banking to be inappropriate for their needs as Muslims.
The return of Tamano to the Senate and the creation of Amanah Islamic Bank
Upon the end of Martial Law in March 1980, the Kilusang Bagong Lipunan (KBL) had become the ruling party in the Philippines. During that time, other parties were being formed. Senator Gil Puyat resumed the Presidency of the Nacionalista Party upon the strong representation of high officials of the Party including Vice-President Fernando Lopez, and Speaker Jose B. Laurel Jr., President Gil Puyat issued Executive Order No.1, Series of 1980 which authorized him to create an Ad Hoc Committee. The revitalization and strengthening of the Nacionalista Party was the purpose of the Ad Hoc Committee. But this suffered a setback when Gil Puyat passed away on March 22, 1981 of a heart attack. The task of revitalizing the party was then pursued by the Ad Hoc Committee of which Mamintal Tamano was a member.
With his return to politics, Tamano became a member of President Corazon C. Aquino’s cabinet as Deputy Minister of Foreign Relations in 1986.
On May 11, 1987, elections were held for 200 members of the House of Representatives and 24 Senators. Elected as senators were 22 candidates of the Aquino coalition Lakas ng Bayan, namely: Jovito Salonga, Liberal Party; Agapito Aquino, Lakas ng Bayan; Orlando Mercado, Unido; John Osmena, Unido-Lakas; Edgardo Angara, Independent; Alberto Romulo, Lakas; Leticia Shahani, Lakas; Neptali Gonzales, Lakas; Rene Saguisag, Independent; Joey Lina, PDP-Laban; Wigberto Tanada, Nationalist bloc; Sotero Laurel, Unido; Heherson Alvarez, Lakas; Raul Manglapus, NUCD; Teofisto Guingona, Bandila; Vicente Paterno, Independent; Vitor Ziga, Independent; Ernesto Maceda, Unido; and Aquilino Pimentel, PDP-Laban; Ernesto Herrera, Laban; Mamintal Tamano, Laban; Santanina Rasul, independent. Only two opposition candidates make it to the Senate: Joseph Estrada and Juan Ponce Enrile, both from the opposition coalition Grand Alliance for Democracy.
Mamintal Tamano’s term as elected Senator of the Philippines was for the period 1987 to 1992. As a Senator, he worked for the autonomy for the Muslims and the rest of Mindanao and on Mindanao’s natural resources. Tamano also worked for the creation of a new Islamic Bank.
By 1987, there were already thirty-three Islamic banks in the Islamic countries and nine others in the western world.
In 1988, the charter of the Al Amanah Islamic Investment Bank of the Philippines was also drafted. By this time, the Philippine Amanah Bank was already perceived to be a total failure. Actually, it was already bankrupt.
To abolish and replace the PAB with a Sharia’ compliant bank, a special law, Republic Act No. 6848 was enacted in 1989. In the formulation of this law, the international Muslim bankers were consulted. Dr. Abdullah Omar Nasseef, then Secretary General of the World Muslim League, was among those consulted. Prominent Muslim bankers like Sheik Hassan Kamel and the Al Baraka Group had also been asked for advice.
On January 26, 1990, President Corazon C. Aquino signed into law R. A. No. 6848, otherwise known as the Charter of the Al Amanah Islamic Investment Bank of the Philippines. On June 25, 1991, I was designated by the office of the President of the Philippines to organize this bank pursuant to the provisions of its charter.
Republic Act No. 6848 repealed Presidential Decree No. 264, the charter of the Philippine Amanah Bank. Hence, this old bank was abolished. The services of its board of directors and all its employees were not terminated outright but they were reclassified by section 49 of the new law, RA 6848, to continue as personnel compliment "in the interim" until the Islamic Bank shall have been properly organized.
On January 16, 1992, an audience with former President Corazon C Aquino was granted by Malacanang Palace. Then Senator Mamintal A Tamano, then chairman of the Committee on Banks and Currencies attended the meeting with Her Excellency in the Palace, with me as the sole government representative to the Islamic Bank. The senator and I briefed Her Excellency on the legal manner of organizing the Al Amanah Islamic Investment Bank of the Philippines, or Islamic Bank, for short. The senator and I were glad to have the blessing of her Excellency.
After coordinating with concerned government agencies and the private stockholders, the Islamic Bank was officially organized by a general shareholders meeting on April 28, 1992 in accordance with its charter. The chairman and president of the abolished Philippine Amanah Bank were disqualified and therefore not elected nor appointed to any position of the new Islamic Bank.
At the time the Islamic Bank was organized in 1992, the national government was the controlling stockholder and there were very few private stockholders with minimal investments. However, when the provisions of RA 6848 were implemented, the number of private stockholders rose to several hundreds in 1993, and more in 1994. So the equation on ownership was reversed gradually owing to the failure of the government to put up its share (Series "A") of investments. Only the private stockholders were able to put up investments by subscribing to Series "B" and "C' shares. And so from 1994, the private stockholders held the controlling interest.
The enactment of RA 6848, the charter of the Al Amanah Islamic Investment Bank of the Philippines was a very important development in the area of international banking. In the years to follow, the Islamic Bank charter was believed to be a model legal framework for Islamic banking and finance that could be adopted by other countries. This charter is applicable to any country whether it belongs to the World of Muslims or to the Western World.
Today, the principles of Islamic banking now reverberate not only in the global banking industry but also in many sectors of the business world and some academies of higher learning. The ethical standards of review that are now being introduced by the so called Sharia’ advisory counsels, such as the one provided in the Islamic Bank charter, is now being adopted by western business entities.
The Sharia’ advisory boards not only consider the conventional project viability and feasibility – but they also look beyond the traditional way. This is the “Sharia’” standard which could include appropriateness, fairness, trust, transparency, the ethical nature of transactions, as well as social responsibility, especially to the poor, the wayfarer, those afflicted with illness, victims of calamities such as the “Tsunami”, and all those in need. That is why the charter provides for “zakat” or tithe. It also provides for “Qard Al Hassan” which means benevolent loans. A “zakat” is paid by every God-fearing believer for the benefit of the poor and the needy. A benevolent loan (qard al Hassan) does not bear interest and repayment may not be expected. It is provided as a loan in much the same manner as a developed country providing development assistance to an underdeveloped country. It is being practiced by the government of the United States of America through the USAID. It is also being done by the government of Japan through JICA. In the Philippines, it is being done by the government of Australia through its Direct Aid Program (DAP). These foreign nations are providing benevolent loans and financial assistance without them knowing that these loans are in the form of “qard al Hassan”.
All business dealings with Islamic banking, finance, trade, commerce, and, in fact all about Islamic economics, can be found in a common reference of all Muslims of the World today and tomorrow. This is the standard under Sharia’. It is common to all Muslims around the World. It is a standard that will never change for all time. That is a fact about Sharia. Its foundation, the Holy Qur’an will never change. The Hadith likewise will never change. Any deviation from the standard that was set by the Holy Qur’an and the Hadith is called “bida’a” and it will be rejected by any real Sharia’ counsel. Said “Bida’a“or deviation from standard will be returned to innovators. There is no compromise. For instance, interest charges maybe disguised as bank charges. Islamic banking under the principles of Sharia’ represents a standard way of economic life. Muslims and non-Muslims alike will learn from these moral standards in all business deals. .
In its mandate to formulate the rules and regulations for the Islamic Bank, the Monetary Board in the Philippines was required by law under Section 48 of RA 6848 to observe “the universal principle of the Islamic Sharia’”.
Paramount of this significant development in international banking is the fact that the Muslim way of doing business is gaining understanding and acceptance in the world of business. This could be the start of international harmony among nations.
The charter of the Islamic Bank provides for a Sharia’ Advisory Counsel to review transactions of the bank in accordance with the Sharia’ standards. The law also provides that the Board of Directors shall sit as a Board of Arbitration to settle intra-corporate disputes among shareholders and investors. To implement this mandate, the Board of Directors was authorized by this law to set the rules and procedure that it shall follow in the arbitration while the Monetary Board was mandated to formulate the rules and regulation
The bank was formally organized on April 28, 1992. Soon after, the Rules of Practice and Procedure before the Board of Arbitration was adopted and promulgated by the Board of Directors. Even if it was rather late, the Monetary Board also issued the Implementing Rules and Regulation (IRR) for the Islamic Bank under BSP Circular 105.
Exactly ten years after its adoption today, the thickness of the IRR is back to the thinness of what it should have been. Today, with some exceptions the IRR is back to being the image-file of the charter of the Islamic Bank. It should now be known as the New Rules and Regulations (NRR) reflecting the new laws of the Millennium in the Philippines, such as the New Central Bank Act, and the New General Banking Law of 2000. And a new development in international banking and finance.
When the IRR for the Islamic Bank was formulated by the Monetary Board in 1996, it includes all sort of rules and regulations applicable to all banks in general including the receipt and payment of interests (riba) which is what the charter prohibits, made illegal and punishable. The rules and regulations applicable to the conventional banks under the old General Banking Act, RA 337 was also made part of the IRR for the Islamic Bank. Sad to say, the Monetary Board in the Philippines never had a Muslim member. The Monetary Board cannot be blamed for something they are not familiar with. Consequently, the Islamic Bank regular lobbyists, namely: the Filipino Muslim Chamber of Agriculture and Fisheries, Inc., ( a major stockholder of the Islamic Bank) and the National Alliance of Muslim NGOs of the Philippines lobbied in Congress relentlessly to remove, revise, or reconstruct the general banking law..
Consequently, Congress not only revised the old GBA, RA 337, but replaced it with the New General Banking Law (GBL 2000), RA 8791. Under this new law, some of the powers of the old Monetary Board were clipped, most of them transferred to the Department of Finance, and some of them to the Securities and Exchange Commission (SEC). And yet some of them were eliminated. Some other banks are now governed by other banking laws, placing the Monetary Board as “still supervising” but along with other authorities.
There are now many banking laws in the Philippines. Thrift banks, rural banks and cooperative banks are now governed by the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code. Cooperative banks are not only monitored but also supervised by the Cooperative Development Authority. Section 94 of 8791 also provides the "phase out of Bangko Sentral Powers over building and loan associations. All the relevant supervisory and regulatory powers of the Monetary Board under that Section were transferred to the Home Insurance and Guarantee Corporation.
As for the Islamic Bank, it is now governed by special laws as provided in Section 71, RA 8791 - rather than the general banking law. This governance covers the "organization" of the Islamic Bank, "its ownership and capital requirements, powers, supervision and general conduct of business".
As an update to IRR under BSP Circular 106 and in pursuance to the provisions of the new GBL 2000, the Monetary Board, in its Resolution No. 2154 dated December 15, 2000, approved Circular No. 271, Series of 2001, otherwise known as the regulations implementing Section 3 and other related sections of R.A. No. 8791. Under this new rules and regulations (NRR), the Islamic Bank is classified as one kind of its own, with its own sets of rules and regulations as distinguished from the other banks.
It has been a dozen years since the Philippines had no Muslim Senators. The 10th, 11th, 12th and 13th Congresses mark the longest period in Philippine history without a Muslim senator. During this period of time, however, the Muslims enjoyed a regional autonomous government in the Autonomous Region of Muslim Mindanao (ARMM). Serving their banking needs is being done by the Amanah Islamic Bank. This is a legacy of Senator Mamintal A. Tamano. It is but fitting to formally recognize him as the brain and founder of the Islamic Bank and its predecessor, the Philippine Amanah Bank. Because he started them all in 1971, Mamintal Tamano is certainly among the founders of Islamic banking worldwide.
Senator Mamintal Tamano passed away on May 18, 1994. Inna lillahi wa inna ilaihi raji-on. (Surely we belong to Allah and to him is our journey).
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