In the Philippines, Filipino Muslims face major challenges when it comes to financial inclusion.
Estimated to be anywhere from 6-11% of the Filipino population [1], Filipino Muslims remain isolated from a key part of daily life: banking. An article from Kenneth Michael De Castro of the De La Salle University estimated that there could be as many as 3 million Muslim Filipinos who do not have access to a formal bank account [2]. The same article notes that one of the main challenges to bringing more Filipino Muslims into commercial banks is the idea that reba or interest is prohibited by the faith, a sentiment not shared by the predominantly Christian population.
Curiosity partnered with Gabay Research to support The Asian Development Bank (ADB) in conducting a study on the demand and viability of Islamic financial services in the Philippines.
In general, and even among the wealthiest individuals, Filipino Muslims still mainly rely on physical cash for everyday transactions, because of the prevailing belief that engaging with commercial banks is against their religion. In other countries, however, there are solutions. Would it work if those solutions were available here?
This was Curiosity's first engagement with ADB, and our first study that involves learning about the Muslim community's challenges and needs. We engaged with research respondents to learn about how we could help guide ADB's initiatives for greater financial inclusion.
We conducted in-depth interviews with micro, small, and medium enterprise owners or decision makers, and focus group discussions with retail banking clients. The interviews and FGDs allowed us to explore people’s broad beliefs, values, and unmet needs that could potentially inspire ideas for new innovations and services.
Language makes it tricky to clarify what is haram (prohibited) and what is halal (permitted). According to Macky Bautista, lead researcher for this project, nuances in the local language cause Muslim Filipinos to hesitate in transacting with local commercial banks. In Tagalog, one of the most used Filipino languages, the word for interest is the same word as profit (tubo). “Profit is technically not interest. However, in Tagalog, it translates to ‘tubo.’ Meanwhile, the word for interest is also ‘tubo’,” Macky explains. “Profit is acceptable and therefore considered ‘halal,’ (in Islam, “lawful”) but interest is ‘haram’ (“unlawful”). Hence, because of the language, what is halal could still be seen as haram.”
One of the respondents shares, “Eh di sir, pareho lang yun! Lahat ng tubo haram na yun. (Sir, that’s the same thing. Any kind of interest is prohibited.) That’s something that they have to find ways to better translate."
There are generational differences when it comes to commercial banking. Younger respondents tended to be more flexible when it came to dealing with local financial institutions and others would find ways to keep their banking halal. “They’re [younger generations] more willing to say, ‘Religion is just one part of my identity, so it’s okay, let’s just do it…’ and there are others who are completely sarado (closed to the idea), and those are interesting because they will find ways to work around the interest,” he shares. Meanwhile, another respondent would withdraw their money as soon as it was deposited to their account, so that it wouldn’t have the chance to accrue interest.
Muslim Filipinos have to negotiate with their faith when it comes to banking. In the case of non-Islamic banks offering Islamic banking products, Filipino Muslims negotiate with themselves. “It might not be the ideal level of halal that I can get, but at least it has other benefits like the branches, as they're easily accessible. It would be easier for me as a banker to access halal financial services, as opposed to if it were a standalone Islamic bank.”
Some of our respondents also highlighted their lack of options in the current banking landscape, telling themselves that they have to transact with commercial banks as part of their employment or business, that "Allah would forgive them" because the money would be used for a good cause, such as starting a business that would employ their fellow Muslims.
One respondent also shared feeling excluded when she entered a commercial bank wearing her hijab, not being able to pinpoint what was wrong, but getting the sense that she was being treated a certain way compared to other customers. Experiences like these highlight the need for Islamic banking, where people can make key financial transactions while feeling accepted.
Education could make Islamic banking more appealing to non-Muslim Filipinos. Introducing Islamic banking in the Philippines as an equitable way to bank can potentially broaden its appeal beyond its core audience of Filipino Muslims. Non-Muslim Filipino respondents who learned about Islamic banking concepts during this project expressed interest in Islamic products because there was collateral involved in the loans, and because the investments offered a win-win arrangement for both the customer and institution.
Their understanding was that as the bank makes money, so would they; and they regarded this as a form of security and safety. They came away with the impression that Islamic banks were more careful and more discerning when it came to their processes. “There’s a sense na ‘Oh, my money is safe with an Islamic bank, I just didn’t know because no one ever explained it to me that these things exist,’” Macky highlighted.
Conducting research with underserved communities means creating the space for open conversations where people’s lived experiences could take center stage. Since our project team was mostly composed of non-Filipino Muslims, it was necessary to create a space that would encourage respondents to open up and share their experiences. Macky shares, “Come into [a situation] with some amount of knowledge, so that the burden isn’t on them. At the same time, have a huge amount of curiosity and openness. Furthermore, being able to consult with someone from the market [or community] prior to the work grants you a level of understanding that is needed to probe properly and better establish rapport.”
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[1] Footnote Source
[2] Footnote Source
