By Lee C Chipongian
The Bangko Sentral ng Pilipinas (BSP), working with other government agencies, is expected to come up with new rules and regulations to expand Islamic banking in the country as soon as possible.
An inter-agency Working Group on Islamic Banking and Finance has been established to develop the regulatory framework, according to the BSP. Aside from the central bank, the Working Group includes Bureau of the Treasury, Department of Finance, Securities and Exchange Commission, Philippine Deposit Insurance Corporation, Insurance Commission, Bureau of Internal Revenue (BIR), the Asian Development Bank, the Financial Reporting Standards Council, and National Commission on Muslim Filipinos.
In the meantime, the BIR has already completed its draft regulation to implement the provision on tax neutrality under the law, said the BSP.
BSP Governor Benjamin E. Diokno, who said previously that they will issue circulars “within months” of the law signing, said on Friday that the Islamic banking law will “unlock the full potential of Islamic financing in fostering inclusive economic growth.”
“With a well-defined regulatory framework now in place, the BSP looks forward to seeing greater participation in Islamic financing by both domestic and foreign banks,” said Diokno. He said this will improve Muslim Filipinos – including those from the Bangsamoro Region – access to banking products and services and to further the goals of financial inclusion.
President Duterte signed Republic Act No. 11439 or “An Act Providing for the Regulation and Organization of Islamic Banks” last August 22. The new law gives power to the BSP to regulate and supervise the operations of Islamic banks in the country.
The law defines Islamic banking business as a “banking business with objectives and operations that do not involve interest (riba) as prohibited by the Islamic or Shari’ah-Law and which conducts its business in accordance with the principles of the Shari’ah.” Islamic banks provide Shari’ah compliant financing contracts and structures and undertake various investments in all transactions allowed by Shari’ah principles.
“Islamic banking and finance promote inclusive finance by making it available to groups that avoid using existing conventional banking facilities due to their faith,” the BSP said in a statement. In the Philippines, the potential market for Islamic banking products mainly comprises the Muslim population which account for about 10 percent of the Filipinos.
The BSP said, however, that islamic banking and finance “can also be attractive to non-Muslims, particularly investors within or outside the Philippines who may be looking for new asset classes, instruments and products in their aim to diversify their portfolios.”
Diokno has said that Islamic banking development, one of his term’s key directions, will not only improve financial inclusion but also increase foreign direct investments from Muslim countries.