AN ACT PROVIDING FOR THE 1989 CHARTER OF THE AL-AMANAH ISLAMIC INVESTMENT BANK OF THE PHILIPPINES

Case Overview and Summary

Summary of Republic Act No. 6848 (The Charter of the Al-Amanah Islamic Investment Bank of the Philippines)

Establishment and Functions
- Creates the Al-Amanah Islamic Investment Bank of the Philippines, with its principal office in Zamboanga City (Section 2)
- Primary purpose is to promote socio-economic development by performing Islamic banking, financing, and investment operations based on Islamic principles (Section 3)
- Establishes a Shari'a Advisory Council of up to 5 Islamic scholars to advise on Shari'a compliance (Sections 4-5)

Corporate Powers
- Grants the Islamic Bank various corporate powers, including adopting bylaws, making contracts, borrowing money, owning property, employing personnel, establishing branches, and performing Islamic banking services like opening accounts, accepting deposits, issuing letters of credit, providing financing, and investing (Section 6)
- Allows the Islamic Bank to act as an official government depository and issue investment certificates, bonds, and debentures (Section 6)
- Permits the Islamic Bank to conduct joint investment operations, invest in allied undertakings, and exercise general banking powers consistent with Islamic principles (Section 6)

Capital Resources and Shares
- Authorized capital stock is 1 billion pesos divided into 10 million shares of 100 pesos each (Section 7)
- Shares are classified into Series A (510 million pesos for government), Series B (90 million pesos for Filipino individuals/institutions), and Series C (400 million pesos for Filipino/foreign individuals/entities) (Section 8)
- Establishes a Board of Arbitration to settle shareholder disputes (Section 9)

Incentives and Exemptions
- Grants the Islamic Bank rights and guarantees under the Omnibus Investment Code, including repatriation of profits and protection against nationalization (Section 10)
- Exempts the Islamic Bank from various taxes for the first 5 years (100%) and the next 3 years (75%) (Section 37)
- Exempts the Islamic Bank from customs duties on imported machinery and equipment for the first 5 years (Section 38)
- Exempts the Islamic Bank from certain laws, including the Central Bank Act (regarding interest rates), General Auditing Act, and insurance laws (Section 39)

Placements and Investments
- Allows the Islamic Bank to accept non-interest-bearing deposits like savings accounts, investment accounts, and current accounts (Section 12)
- Permits the Islamic Bank to invest depositors' funds in Shari'a-compliant investments and allocate resources to finance projects (Sections 13-15)
- Depositors are entitled to a share of profits based on their deposit balances and period (Section 14)

Operations and Management
- Authorizes the Islamic Bank to provide banking services except those prohibited by the Act (Section 16)
- Permits the Islamic Bank to operate as an investment house and venture capital corporation, engaging in commercial operations like joint ventures and profit-sharing investments (Section 17)
- Allows the Islamic Bank to adopt employee profit-sharing and share acquisition schemes (Section 18)
- Imposes investment ceilings and business limits, such as a 15% cap on credit facilities to a single customer and a 30% cap on investments in a single industry (Section 19)
- Restricts loans to directors, officers, and employees, except for service loans and special circumstances (Section 20)
- Requires the Islamic Bank to maintain capital accounts proportional to assets, an Investment Risk Fund, and submit periodic reports (Sections 22-24)
- Establishes a Board of Directors, Chief Executive Officer, and Business Development Office (Sections 25-28)
- Outlines provisions for general shareholders meetings, both ordinary and extraordinary (Sections 29-31)
- Appoints an external auditor approved by shareholders (Section 32)
- Maintains confidentiality of banking transactions and information (Section 33)

Profit and Loss Policy
- Financial year follows the Gregorian calendar, with profits and losses determined annually (Section 34)
- Outlines the process for determining and allocating profits, including deductions for reserves and the Investment Risk Fund (Section 35)
- Allows the Islamic Bank to share profits with investors and itself as a joint venturer (Section 36)

Legal Existence and General Provisions
- Grants the Islamic Bank a legal existence of 50 years, renewable by shareholders (Section 42)
- Requires the Monetary Board to formulate rules and regulations for the Islamic Bank's operations in accordance with Islamic Shari'a principles (Section 43)
- Defines key terms like Islamic banking, Shari'a, riba, zakat, depositor, and participation (Section 44)
- Imposes penalties for violations, including fines up to 10,000 pesos and/or imprisonment up to 5 years (Section 45)
- Subjects the Islamic Bank to Central Bank supervision and regulation, except for Shari'a principles (Section 46)
- Allows for privatization of the Islamic Bank's ownership (Section 47)
- Transfers assets, liabilities, and capital accounts of the Philippine Amanah Bank to the Islamic Bank (Section 48)
- Requires the Islamic Bank to reorganize within 6 months and adopt bylaws within 60 days (Sections 49-51)
- Repeals Presidential Decree No. 264 and 542 creating the Philippine Amanah Bank (Section 52)

Effectivity
- The Act takes effect 15 days after publication in at least two newspapers of general circulation (Section 53)