The Bangko Sentral ng Pilipinas (BSP) will create the Shari’ah Supervisory Board (SSB) in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) to promote Islamic finance and Islamic banking in the region.
This developed as the BSP announced on Monday, April 18, the approval of a joint circular (JC) and a memorandum of agreement (MOA) with the Department of Finance, the National Commission on Muslim Filipinos, and the Bangsamoro Government on the establishment of the SSB.
“The JC and MOA formalize the agencies’ collaborative efforts in Shari’ah governance, following the government’s strategy to provide an enabling environment for the Islamic banking industry. The SSB will provide essential Shari’ah compliance oversight to enable Islamic finance to flourish in the country,” said BSP Governor Benjamin E. Diokno.
The central bank noted that the SSB complements the Shari’ah Advisory Council of Islamic banks required under the BSP’s licensing and Shari’ah governance frameworks, under BSP Circular Nos. 1069 and 1070.
“Republic Act No. 11439 or the Islamic Banking Law provides flexibility for the government to convert the SSB into a national body, if warranted, such as when there is already a critical number of Islamic banking players in the financial system,” said Diokno.
The BSP said the JC and MOA include relevant provisions of Republic Act No. 11054 or “An Act Providing for an Organic Law for the Autonomous Region in Muslim Mindanao” on Islamic banking and finance in the BARMM.
“The SSB’s primary function is to issue Shari’ah opinions on Islamic banking transactions and products in the BARMM. At the same time, the BSP, financial institutions, and other stakeholders may request the SSB to provide Shari’ah opinions on matters related to Islamic banking and finance,” said the BSP.
To encourage and promote Islamic banking in the country, the BSP wants to lower the required capital to set up an Islamic bank or Islamic banking unit (IBU) which is a minimum P3 billion up to P20 billion depending on the number of branches.
Diokno said that capital requirement is one of the cited reasons by banks why there is still no applications to put up IBUs or Islamic banks.
The current minimum capital requirement for Islamic banks or IBUs is the same as for the universal and commercial banks.
Diokno also said that besides the capital requirement, another concern for the low turnout of inquiries to establish Islamic banks or IBUs is lack of information or understanding, especially for the Shari’ah. It is one of BSP’s many challenges that there are not enough Shari’ah scholars or Islamic finance experts in the country.
Shari'ah, which defines a set of rules and the lslamic financial system, refers to the practical divine law deduced from its legitimate sources such as the Qur'an, Sunnah, consensus of Muslim scholars, analogical sources of lslamic law.