MANILA, Philippines — Public markets, hospitals and clean water systems could become the focus of a new financing initiative as state-owned Al-Amanah Islamic Investment Bank of the Philippines prepares to expand Shariah-compliant funding to local government units beginning in 2027.
The initiative, initially targeting Mindanao, aims to help provinces, cities, municipalities and qualified barangays develop infrastructure that could otherwise face delays because of limited annual budgets.
But Al-Amanah chairperson and chief executive officer Amenah “Mina” Pangandaman is raising a question that goes beyond securing money for construction.
What happens after a facility opens—and can the local government afford to keep it operating?
In an October 21 commentary published by InsiderPH, Pangandaman argued that successful development financing should be judged through the lives it improves rather than the financial transactions recorded by banks.
For a market vendor, a functioning public market can mean a dependable place to earn a living. For families, a reliable water system or accessible healthcare facility can make daily life more manageable.
The challenge is whether Islamic financing can deliver these benefits without creating obligations that weaken the same public services it is meant to support.
Al-Amanah Plans to Launch LGU Financing in 2027
Al-Amanah’s proposed expansion into local government financing was first publicly detailed in September 2026.
The bank intends to offer Shariah-compliant financing for infrastructure and service-related projects, with Mindanao receiving priority before a possible nationwide expansion.
The strategy marks a significant broadening of the bank’s activities.
Al-Amanah currently offers Shariah-compliant financial services to individuals, agricultural workers, cooperatives and micro, small and medium enterprises.
Under the planned program, eligible local governments could obtain financing linked to identifiable assets, construction activities or lease arrangements.
Pangandaman said the bank wants to establish financing terms that are transparent from the outset, including predetermined total costs and fixed profit or rental rates.
However, the program is still being prepared.
No aggregate financing budget, number of approved LGUs or list of completed projects was announced in the October 21 column.
The 2027 date is a rollout target—not confirmation that infrastructure projects have already been funded or completed.
What Makes Islamic Financing Different?
Islamic finance operates under Shariah principles that prohibit interest, commonly referred to as riba, and impose requirements concerning the underlying economic activity and the structure of financial transactions.
Rather than simply providing an interest-bearing loan, an Islamic bank may structure financing through an asset sale, construction arrangement, lease or other permissible agreement.
For example, a financial institution might acquire an asset and sell it to a customer at an agreed markup, or lease an asset in return for predetermined rental payments.
These structures can allow financing costs to be established in advance.
But Shariah-compliant financing does not mean the capital is free.
Banks may earn profit, rent or other permissible returns depending on the agreement.
A fixed profit rate is also not automatically lower than a conventional interest rate.
Borrowers must compare the total financial obligation, fees, repayment terms and applicable risks before deciding which financing option best meets their needs.
For LGUs, the key advantage proposed by Al-Amanah is predictability combined with financing tied to specific assets or projects.
Whether those advantages produce better financial outcomes will depend on the actual contract and the project’s performance.
Public Markets Could Support Small Entrepreneurs
One of the proposed financing targets is the construction or improvement of public markets.
Such facilities provide spaces where farmers, fish vendors, food sellers and other small entrepreneurs can reach customers.
Modern markets may also require proper sanitation, reliable electricity, storage areas and other essential services.
For a local government, improving a public market could support commercial activity and potentially generate income through properly structured rentals or stall fees.
But financing and completing a building is not enough.
Market stalls must remain affordable for vendors.
The location must be accessible to customers.
Sanitation, utilities and maintenance must be sustained.
Pangandaman’s argument is that a financially successful transaction should not be confused with a socially successful project.
If traders cannot afford to use the facility, the development may fail to deliver its intended economic value even if construction was completed on schedule.
Water Systems and Healthcare Facilities Are Also Priorities
The bank is considering projects involving water infrastructure, hospitals and other healthcare facilities.
Reliable water services can support homes, schools and businesses while reducing the difficulties associated with inadequate access.
Healthcare facilities can make essential services more accessible to communities located far from major hospitals.
But these projects often require continuing expenditures.
A water system needs repairs, maintenance and effective management.
A hospital requires healthcare professionals, medicines, utilities and operating budgets.
Financing construction without accounting for these expenses creates a risk that a completed facility could later become underused or financially unsustainable.
That is why the bank says it will consider how local governments plan to meet their long-term obligations.
The project must serve an identifiable need and remain feasible after the initial financing has been arranged.
Cold Storage and Transport Facilities Could Strengthen Local Economies
Al-Amanah’s broader list of possible projects includes cold storage facilities, transport terminals, slaughterhouses, farm-to-market roads and bridges.
These investments can potentially improve the movement of goods and services.
Cold storage may help food producers and distributors manage products that require refrigeration.
Transport terminals can provide organized spaces for passenger services and commercial activity.
Farm-to-market roads can improve access between production areas and local markets.
However, every category presents different commercial risks.
Cold storage requires electricity, refrigeration maintenance and enough customers to use the facility.
Transport terminals require sound traffic planning and continuing management.
Roads and bridges need maintenance budgets even when they do not generate direct revenue.
A responsible financing arrangement must reflect these differences.
Not every infrastructure project can be evaluated using the same revenue model.
LGUs Must Meet Financial Eligibility Requirements
Al-Amanah’s September announcement outlined proposed requirements for local government applicants.
Provinces, cities, municipalities and barangays may be considered if they satisfy specified financial conditions.
These include balanced or surplus actual income over the preceding three years and efficient collection of real property and other local taxes, with collections demonstrating steady growth.
The bank also said priority may be given to LGUs that designate Al-Amanah as their national tax allotment depository.
Meeting the bank’s criteria would not automatically override legal rules governing local government borrowing.
Financing arrangements would still need to comply with applicable borrowing, debt-service, approval and budgetary requirements.
These safeguards are important because local governments depend on public resources to deliver essential services.
If repayment obligations become too large, they may crowd out other spending priorities.
A project’s desirability therefore needs to be assessed alongside the LGU’s actual capacity to pay.
Why Mindanao Comes First
Mindanao is the initial focus because the bank sees significant demand for infrastructure and improved financial access in the region.
Local governments vary widely in population, revenue capacity, geography and public service requirements.
A financing arrangement suitable for a major city may not be appropriate for a smaller municipality.
A town with limited recurring revenue may struggle to support a large facility even when the initial construction appears economically attractive.
The planned program therefore requires project-by-project assessment.
Pangandaman has emphasized that financing decisions should respond to local conditions instead of applying identical terms to every community.
The eventual nationwide rollout will depend on implementation, regulatory requirements, market demand and the bank’s financing capacity.
No confirmed expansion schedule beyond the initial Mindanao phase has been released.
Islamic Banking Is Part of a Wider Philippine Financial Inclusion Strategy
The Philippines has an established legal framework for Islamic banking.
Republic Act No. 11439, enacted in 2019, provides for the regulation and organization of Islamic banks and Islamic banking units.
The Bangko Sentral ng Pilipinas has issued supplementary rules covering Shariah governance, liquidity risk management, reporting and other prudential matters.
The objective is to allow Islamic financial institutions to operate within a supervised banking environment alongside conventional institutions.
Although Islamic finance follows Shariah principles, its services are not restricted exclusively to Muslim customers.
It can provide alternative financial products to individuals, businesses and eligible institutions from different communities.
For Mindanao, the availability of financing structures that meet religious and ethical preferences may broaden participation in the formal financial system.
However, financial inclusion must be measured through actual access, affordability and outcomes, not simply the availability of additional products.
The Government Is Also Developing the Sukuk Market
The Al-Amanah initiative coincides with broader efforts to expand Islamic finance in the Philippines.
In February 2026, the Securities and Exchange Commission issued Memorandum Circular No. 12, establishing guidelines on the issuance and disclosure of sukuk.
Sukuk are Shariah-compliant investment certificates representing rights or interests associated with permissible assets, services or projects.
In July, the SEC and Asian Development Bank held a forum to promote understanding of the new framework.
The BSP also participated, underscoring the importance of regulatory coordination.
The Philippines previously issued its first sovereign sukuk in December 2023, which the Department of Finance said attracted demand nearly five times the available offering.
These developments demonstrate increasing institutional support for Islamic finance.
But sukuk and Al-Amanah’s proposed LGU financing program are not the same instrument.
The existence of a sukuk regulatory framework does not mean Al-Amanah has already announced a sukuk issuance to finance its local government projects.
Al-Amanah’s Own Financial Strength Matters
The bank’s capacity to expand lending is also relevant.
According to a July 2026 Philippine Daily Inquirer report, Al-Amanah had grown its assets to approximately ₱2.6 billion under its previous leadership.
Pangandaman became chairperson and CEO in July 2026.
The bank’s new role in local government infrastructure will require careful management of liquidity, credit exposure and project-related risks.
Infrastructure commitments can involve longer repayment periods and more complicated financial arrangements than ordinary consumer products.
The bank must also ensure that its investments remain consistent with regulatory and Shariah governance requirements.
That makes the scale of any future financing program especially important.
Without an announced financing envelope, it is premature to estimate how many water systems, markets or healthcare facilities the bank could support.
Development Should Be Measured Beyond Construction
Pangandaman’s column advances a wider argument about public investment.
The most meaningful measure of infrastructure is not simply how much money was released, how many contracts were signed or how quickly facilities were completed.
It is whether the development continues to deliver useful services.
For a public market, that may include affordable space and stable opportunities for vendors.
For a transport terminal, it may involve safety, accessibility and reasonable costs for commuters.
For a healthcare facility, the critical test is whether patients can obtain the services they need.
These outcomes are harder to summarize than a single investment figure.
They also require longer-term monitoring.
A completed project may be financially compliant while still failing to meet community needs.
The bank’s approach, according to Pangandaman, is to evaluate the operating future of a project before committing to finance its construction.
Women Entrepreneurs and Underserved Communities Must Be Included
Another part of the proposed development framework concerns who benefits.
A new market may appear successful because it contains hundreds of stalls.
But if stall rents are too expensive for small vendors, the project may exclude some of the people it was intended to help.
Similarly, a transport facility may improve infrastructure on paper but remain difficult to use for workers with limited mobility or income.
Inclusive planning requires attention to affordability, accessibility and the actual needs of different groups.
Women entrepreneurs, small traders, farmers and underserved households should have meaningful opportunities to benefit from the projects developed in their communities.
These considerations are not unique to Islamic finance.
They are fundamental tests of responsible public investment.
The question is whether Al-Amanah and participating LGUs can translate such principles into concrete project-selection criteria and measurable outcomes.
Fixed Financing Costs Do Not Eliminate Risk
One of the proposed program’s attractive features is a predetermined profit or rental rate.
Predictable payment obligations may help local governments plan their budgets.
But stable financing costs do not guarantee stable project revenues.
A public market may collect less rent than expected.
A transport terminal may receive fewer passengers than projected.
A cold storage facility could face unusually high electricity costs.
A local government may also encounter emergencies that require urgent spending.
Under such conditions, even an otherwise predictable payment schedule could become difficult to sustain.
The most important safeguards are therefore realistic revenue forecasts, prudent borrowing levels, appropriate reserves and effective public financial management.
Islamic financing does not eliminate the possibility of financially unsuccessful projects.
What Will Determine the Success of the 2027 Program?
The proposed initiative will need to clear several milestones.
Al-Amanah must finalize and launch appropriate financial products.
Interested LGUs will need to satisfy eligibility and borrowing requirements.
Each proposed project must undergo technical, commercial and financial assessment.
Contracts must clearly identify the assets or services involved, the obligations of all parties and the total cost of financing.
Local governments will also need credible plans for operating and maintaining completed facilities.
Once projects become operational, their performance should be measured against service delivery and community outcomes.
The bank has not yet publicly disclosed a complete list of participating LGUs, approved financing amounts or guaranteed completion dates.
That means the program should be evaluated as a proposed financing expansion, not as a series of completed infrastructure investments.
The Bigger Test: Can Islamic Finance Build Lasting Prosperity?
Al-Amanah’s planned 2027 expansion offers a potential new source of development financing for local governments, particularly in Mindanao.
Its emphasis on identifiable assets and predetermined costs may appeal to LGUs seeking alternatives to conventional borrowing arrangements.
The initiative also reflects the Philippines’ wider effort to develop an Islamic financial sector that can support businesses, communities and public infrastructure.
But the ultimate measure of success will not be the number of contracts signed or the peso value of financing approved.
It will be whether the projects remain financially sustainable and continue delivering meaningful public services.
Al-Amanah wants to help Mindanao’s local governments build markets, water systems, healthcare facilities and other essential infrastructure beginning in 2027. But the real test is whether those investments can improve the lives of ordinary Filipinos without creating financial burdens that undermine the future of their communities.
