Philippine Banking and Financial Structure

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Questions and Answers

What type of institution is LANDBANK classified as?

Universal Bank (correct)

Non-Banking Finance Company

Specialized Government Bank (correct)

Commercial Bank

Which of the following best describes the function of non-banking finance companies?

They provide full banking services.

They have a full banking license.

They do not provide all services of a bank. (correct)

They are subject to the same regulation as banks.

What is the primary focus of LANDBANK?

Serving farmers and fishermen (correct)

Retail banking for urban areas

Global investment banking

Corporate banking services

Which type of bank is NOT listed as part of the banking structure?

Investment Bank Signup and view all the answers

How does LANDBANK maintain its financial viability?

Balancing social mandate with financial sustainability Signup and view all the answers

What distinguishes government banks from other banking institutions?

They are owned and operated by the government. Signup and view all the answers

Which function do traditional banks primarily handle?

Deposits and extending credit Signup and view all the answers

What is a common characteristic of thrift banks?

Focusing on affordable housing finance Signup and view all the answers

What is the primary purpose of LANDBANK's profits from its commercial banking operations?

To finance developmental programs and initiatives. Signup and view all the answers

Which major role does LANDBANK serve in relation to the Comprehensive Agrarian Reform Program (CARP)?

It evaluates land, compensates owners, and collects amortizations. Signup and view all the answers

What distinguishes LANDBANK as the largest formal credit institution in rural areas?

The volume of loans and deposits it handles. Signup and view all the answers

What is one of the services provided by the Development Bank of the Philippines (DBP)?

Financing for small and medium enterprises. Signup and view all the answers

Which statement best describes LANDBANK's mission regarding technology?

To utilize the best technology solutions for financial services. Signup and view all the answers

In what areas does the DBP primarily focus its financing efforts?

Infrastructure, social services, small and medium enterprises, and the environment. Signup and view all the answers

What is an essential goal of LANDBANK in terms of its vision for the countryside?

To promote inclusive growth and improve quality of life. Signup and view all the answers

How is the DBP classified under its new charter?

As a development bank with thrift bank functions. Signup and view all the answers

What is the primary objective of the Development Bank of the Philippines?

To offer banking services for medium and long-term needs of agricultural and industrial enterprises Signup and view all the answers

In which year was the Agricultural and Industrial Bank created?

1939 Signup and view all the answers

What marked the reorganization of the Rehabilitation Finance Corporation to the Development Bank of the Philippines?

A shift from rehabilitation to broader development activities Signup and view all the answers

What was the initial capital with which the Development Bank of the Philippines was established?

P500 million Signup and view all the answers

What is one of the missions of the Development Bank of the Philippines?

To support infrastructure development and efficient social services Signup and view all the answers

How did the Development Bank of the Philippines expand its capital resources?

By obtaining credits from international financial institutions Signup and view all the answers

What significant event in the history of development financing occurred in 1946?

The creation of the Rehabilitation Finance Corporation Signup and view all the answers

What role do development financing institutions like DBP play in the Philippines?

They play a critical role in sustainable growth and development Signup and view all the answers

What is the primary purpose of the Shari’ah advisory council in Islamic banks?

To provide advice on Shari’ah principles and review applications Signup and view all the answers

Which principle is NOT part of Islamic finance?

Interest/Usury (Riba) is permitted Signup and view all the answers

How do Islamic banks typically share profits with borrowers?

By taking equity participation in ventures Signup and view all the answers

What does Murabaha refer to in Islamic finance?

Cost-plus selling where the bank purchases an item for a customer Signup and view all the answers

Which of the following statements about Riba is accurate?

Riba involves any excess without countervalue in exchanges Signup and view all the answers

Which of the following best describes Ijara in Islamic finance?

A leasing arrangement where the bank retains ownership Signup and view all the answers

What is a key characteristic of Islamic finance regarding investments?

Encouragement of risk sharing and ethical investments Signup and view all the answers

Which of the following statements is NOT true regarding Islamic finance?

It is only designed for Muslim individuals and organizations Signup and view all the answers

What is the primary principle behind the Current Account under 'Wadiah'?

Deposits are repayable on demand without notice. Signup and view all the answers

Which account type allows customers to withdraw their savings using a passbook?

Savings Account Signup and view all the answers

What is the purpose of the Pilgrimage Savings Plan (PSP)?

To save for future Muslim pilgrimages. Signup and view all the answers

What does the term 'Shariah' signify in Islamic finance?

A set of laws governing religious practices. Signup and view all the answers

Which financial products may an Islamic investment bank issue to promote economic development?

Sukuk and investment participation certificates. Signup and view all the answers

What type of loans does the Universal Bank offer?

Developmental and car loans to both private and public sectors. Signup and view all the answers

Which of these statements best defines Islamic finance?

A finance model based on Shariah law principles. Signup and view all the answers

What aspect of life does Shariah cover for Muslims?

Beliefs, responsibilities, rights, and rituals. Signup and view all the answers

Study Notes

Philippine Financial Structure

Banks are the traditional institutions for handling deposits and extending credit.
Non-banking finance companies are not subject to the same regulations as banks and don't provide all the same services.

Banking Structure

The banking structure is a hierarchy with categories such as rural banks, cooperative banks, savings and mortgage banks, thrift banks, private development banks, commercial banks, stock and savings loan associations, and universal banks.
Government banks fall under the "thrift banks" category but can offer a wide range of services.

Landbank of the Philippines (LBP)

LBP is a universal bank owned by the Philippine government.
LBP specializes in serving the needs of farmers and fishermen.
LBP is classified as a "specialized government bank" with a universal banking license.
It has a dual function: promoting rural development and remaining financially viable.
It ranks among the top five banks in the Philippines in terms of deposits, assets, and loans.
LBP is the largest formal credit institution in rural areas.

Vision and Mission of Landbank of the Philippines

Vision: To be the top universal bank promoting inclusive growth and improving quality of life in the countryside through innovative services.
Mission: Deliver responsive financial and support services using technology, while promoting sustainable development and environmental protection.
Mission: Develop and nurture talented employees who exemplify ethical and high standards of excellence.

Major Roles of Landbank of the Philippines

Implementing agency of the Comprehensive Agrarian Reform Program (CARP), this involves tasks like land evaluation, compensation to landowners, and debt collection.
Providing credit assistance to small farmers and fishermen.
Official depository for government funds.
A government bank with a social mandate to boost rural development.

Landbank of the Philippines' Products and Services

Offers deposits such as current, savings, call accounts, time deposits, special purpose deposits, and trust account.
Provides traditional loans for businesses, mortgages, and consumer loans.
Offers services like foreign exchange, letter of credit, and bank drafts.

Development Bank of the Philippines (DBP)

DBP is a development bank tasked with providing banking services to agricultural and industrial enterprises.
Focuses on financing in four key areas: infrastructure and logistics, social services, small and medium enterprises, and the environment.
Classified as a development bank, it may also perform all functions of a thrift bank.
Its primary objective is to address the medium and long-term needs of agricultural and industrial businesses, particularly small and medium-scale industries.
DBP plays a crucial role in sustainable growth and development in the Philippines.

DBP's History

Its origins can be traced back to the Commonwealth era with the creation of the National Loan and Investment Board (NLIB).
The NLIB was later replaced by the Agricultural and Industrial Bank (AIB).
After the war, the Rehabilitation Finance Corporation (RFC) was established and later reorganized into the DBP in 1958.

DBP's Mission and Vision

Mission: Support infrastructure development, responsible entrepreneurship, efficient social services, and environmental protection.
Mission: Elevate economic competitiveness for sustainable growth.
Mission: Promote and maintain high standards of good governance.
Vision: To be the leading and preferred Islamic financial institution.

Islamic Bank of the Philippines

The Islamic Bank of the Philippines is a universal bank offering developmental and car loans to the private and public sectors, and other Islamic investment assistance.
Its focus is on providing Islamic financial services to the Muslim community.

Islamic Finance

Islamic Finance is a financial system based on Islamic law (Shari'ah).
The principles of Islamic finance aim to ensure fairness, transparency, and ethical practices.

Shari'ah Advisory Council

Islamic banks are required to have a Shari'ah Advisory Council composed of experts in Islamic law, finance, and banking.
The council advises on the validity and application of Islamic principles in banking activities and ensures compliance with Shari'ah.

Key Principles of Islamic Finance

Belief in Divine Guidance: To remove harm and promote fairness with consideration of the hereafter.
Explicit prohibition on interest/usury (Riba): any increase on a loan due to delayed payment is forbidden.
No haram (forbidden) investments or activities: Investments and activities must align with Islamic principles.
Risk sharing is encouraged: This encourages investment in projects with the potential for shared profits.
Asset-backed financing: Unlike traditional loans, Islamic finance often involves the purchase or ownership of assets.
Not solely for Muslims: Islamic financial principles can benefit both Muslims and non-Muslims.

Explicit Prohibition of Interest/Usury (Riba)

Riba (Interest): any gain on a loan due to delayed payment.

How Islamic Financial Institutions Earn Profit

Profit is earned through equity participation. Instead of paying interest, borrowers share profits with the bank.
The bank acts as a partner in the venture, sharing in both gains and losses.

Murabaha or Cost Plus Selling

A common product in Islamic finance portfolios.
The bank purchases an item (like a car) and sells it to the customer at a higher price on installment.
The markup covers the bank’s costs and profit.

Ijara or Leasing

When a customer needs a car, for instance, the bank buys the car and leases it to the customer.
The customer acquires the car at the end of the lease term.

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Description

Explore the intricacies of the Philippine banking system, including the roles of various banks and financial institutions. This quiz covers traditional banks, non-banking finance companies, and the specialized functions of the Landbank of the Philippines. Test your knowledge on the financial landscape in the Philippines.