The Bangko Sentral ng Pilipinas (BSP) is increasing its Islamic finance experts and personnel to promote Islamic banking in the country and encourage investments in Islamic finance products.
The BSP on Monday, March 27, said that there are now 50 personnel that have been certified by the Islamic Banking and Finance Institute Malaysia’s (IBFIM) Associate Qualification in Islamic Finance (AQIF) program.
The BSP has been working with the Asian Development Bank (ADB) to support the individual AQIF certification of at least 55 member-representatives of the BSP-led Islamic Finance Coordination Forum (IFCF), and other partner-agencies.
BSP Assistant Governor Arifa A. Ala, who is the IFCF chairperson, said there is a “need for continuous capacity-building activities and attaining formal certification” including the AQIF program.
Ala said that “these initiatives complement the whole-of-government approach in developing a stable and sustainable Islamic finance ecosystem in the country.”
The IFCF is composed of the BSP, ADB, Department of Trade and Industry, Securities and Exchange Commission, Insurance Commission, National Commission on Muslim Filipinos, Bureau of Internal Revenue, Bureau of the Treasury, Philippine Deposit Insurance Corp., Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), Philippine Financial Reporting Standards Council, and Auditing and Assurance Standards Council.
Last Feb. 25, the Kuala Lumpur-based IBFIM recognized the BSP with the “Outstanding Industry Collaboration Award”, which was received by Ala on behalf of the central bank.
This award, which started in 2018, is given to local and international institutions for their outstanding collaboration with IBFIM in developing professionals in the field of Islamic finance, said the BSP.
IBFIM is an industry-driven learning institution specializing in technical certifications that serve the needs of the Islamic finance industry. The BSP said its key programs are developed based on a qualifications framework and are accredited by the Finance Accreditation Agency, an organization in Malaysia that certifies international financial training courses.
“The award recognizes the BSP’s calibrated efforts and strong commitment to enhancing the competencies of BSP personnel and IFCF members on Islamic banking and finance,” said Ala.
Before the global pandemic was declared on March 2020, the BSP was already talking to two banks interested in setting up either a full Islamic bank or an Islamic Banking Unit (IBU). Recently, an Islamic bank based in Turkey is also keen on exploring Islamic finance in the country.
At the moment, the Philippines only has one Islamic bank, the state-owned Al Amanah Islamic Investment Bank. It is a subsidiary of the Development Bank of the Philippines and created by a presidential decree in 1973.
Meanwhile, the BSP is preparing a new rule for the required minimum capital level for non-Islamic banks or conventional banks planning to establish IBUs. The proposed capital requirement for Islamic banks are the same as conventional banks which is a range of P3 billion to P20 billion depending on how many branches will be put up.
The capital requirement is one of the reasons why there are few IBU applicants. A hefty capital is needed to establish a Shari’ah Governance Framework (SGF). The SGF ensures that the Islamic bank or IBU adheres to Shari’ah principles and has a Shari'ah Advisory Council.
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.
Republic Act No. 11439 or the Islamic Banking Law was enacted in 2019. But it was only in 2021 that the BSP initiated the creation of the Shari’ah Supervisory Board (SSB) in the BARMM. The SSB’s primary function is to issue Shari’ah opinions on Islamic banking transactions and products in the BARMM.
During the pandemic, the BSP did not let up on its pursuit to grow Islamic finance in the country. It is currently conducting a pro-active campaign to promote Islamic banking and finance despite that no banks have applied for its license yet.
The key difference between an Islamic bank and a conventional bank is that depositors are “investors rather than lenders” in the former and they are just lenders in the latter.