Two banks are interested to set up in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) as the Philippines has become an attractive location following the issuance by the Bangko Sentral ng Pilipinas of key regulatory framework and licensing of Sharia governance and tax neutrality.
Atty. Noel P. Tianela, officer in charge for the supervisory, policy and research of the BSP, revealed at the virtual event on “Delivering Islamic Microfinance in BARMM: The ASA Philippines Foundation Experience” of one or two possible prospects to establish a branch or set up full fledged Islamic branch in BARMM from their existing conventional bank operation.
Tianela did not identify the prospect but said embassy officials and BSP are discussing the prospects.
In the same event, Maharlika Alonto, adviser of ASA Philippines Foundation, expects more Islamic banks and financing institution players in the country in the next five years.
At the same event, BSP Deputy Governor Chuchi Fonacier said that the Philippines has become an attractive venue for Islamic banking and finance with the issuance by the BSP of key regulatory framework and licensing Sharia governance and tax neutrality, coupled with our country’s strong economic fundamentals.
“The Philippines has become an attractive venue for Islamic banking and finance,” she stressed.
“The BSP has been at the forefront and has been very actively involved in events aimed at attracting foreign investors or foreign Islamic banks to establish either a full fledged a branch or an Islamic banking unit in the Philippines,” said Fonacier.
According to Fonacier, the BSP has established the necessary reforms that convey to the market, that the Philippines fosters an open and competitive financial system with a prospect for anticipated or Islamic banking, especially when economies is just the new normal.
Fonacier stressed that the role of Islamic finance in promoting social equity, equity, cannot be overlooked, noting that there are still predominantly Muslim provinces like the Bangsamoro Region in Muslim Mindanao where poverty incidence is as high as 68 percent.
Islamic finance can deepen financial inclusion because Islamic finance products are specifically designed to support the needs and protect the rights of the poor and the underserved.
“We at the Bangko Sentral ng Pilipinas recognize this important role. Therefore we have been working continuously to provide an enabling environment that will further promote the growth and development of Islamic banking and finance in the Philippines,” she said.
On December 27 2019, shortly after Islamic banking law took effect in September 2019, Fonancier said, the BSP issued the preliminary implementing regulations, consisting of Circular Number 1069 or the guidelines on the establishment of Islamic banks and Islamic banking units in the Philippines, as well as circular number 1070, the Sharia governance framework.
Under the Sharia and governance framework, Islamic banks and Islamic banking units are required to establish their Sharia Advisory Council, primarily to ensure that their products are indeed Sharia compliant.
Moreover, as part of the initiatives to strengthen the understanding on Islamic banking and finance or increased awareness, the BSP issued the frequently asked questions on Islamic banking through a memorandum issued in June 2020.
In addition, the revenue regulation implementing the general principle of cash neutrality provision of the Islamic banking law has also been approved by the Department of Finance Secretary, on August, 2020 and subsequently issued by the Bureau of internal revenue on August 7 2020.
“This revenue regulation is another great milestone for Islamic banking and finance in the Philippines as it provides a level playing field for Islamic banking products and services,” she said. Under the said revenue regulation, it is provided that Islamic banking products should not be taxed heavily nor more lightly than their conventional counterparts.
Furthermore, Fonacier said that the BSP is continuously finding better ways of doing things under the new normal and working on the completion of more issuances which are supportive of the development of Islamic banking and finance in the country.
In addition, under the Bangsamoro Organic Law, the BSP together with the Bangsamoro government, the Department of Finance and the National Commission on Muslim Filipinos are mandated to jointly promote the development of an Islamic banking and finance system to include, among others, the establishment of a sherry as supervisory board in the Bangsamoro region, pursuant to the Bangko Sentral and the Bangsamoro government are working on the terms of reference of the Shree, super supervisory board, and we hope to have the Sharia supervisory board established within this year.
“With all these developments I am optimistic about the future of Islamic finance in the country. We now have the much awaited and much needed regulatory framework and the supporting environment to usher in a vibrant, Islamic finance industry, marked by multiplicity of players,” said Fonacier.
She, however, said that their work is not yet complete. In fact, she said, much is still needed to be done to achieve the full potential of Islamic finance that requires mutual cooperation and collaboration among all stakeholders from the government to the lawmakers, regulators to the policymakers, and the public.
“I would like to end by conveying that the Bangko Sentral is committed to support the growth of Islamic finance in the country. Together, we can transform Islamic finance from faith base to business driven industries for all communities whether Muslims or non Muslims, and industry that will not only promote financial inclusion and stability, but will also meet the needs of financially underserved population, create better for opportunities and promote high quality of life for all of us, Filipinos,” she said.