State-run Philippine Deposit Insurance Corp. (PDIC) is set to draft specialized guidelines to transition Islamic deposits from conventional insurance coverage to a Shariah-compliant framework.

This move forms part of the Department of Finance (DOF) and other regulators’ push to build a robust Islamic finance ecosystem, alongside initiatives such as the issuance of sukuk bonds and the implementation of Shariah-compliant deposit insurance.

“Due to the unique characteristics of Islamic banking, the PDIC will be formulating guidelines for the transition from conventional insurance coverage of Islamic deposits to a Shariah-compliant framework, in order to better serve the Muslim community,” Finance Secretary Frederick D. Go said during the Fifth International Islamic Finance Conference (IIFC) on Monday, Feb. 2.

To date, the state deposit insurer has already provided a safety net for Islamic banking units (IBUs), offering a maximum deposit insurance coverage of ₱1 million per depositor, per bank. This ensures that “depositors of Islamic banks now have the same level of protection as those in conventional banks.”

The regulatory shift follows recent developments in the insurance industry. In 2024, the Insurance Commission (IC) issued the first takaful operator licenses to several players, including Pru Life, Etiqa, Stronghold Insurance Company Inc., and CARD Mutual Benefit Association Inc.

“What’s great about this is that takaful opens the door to ethical, cooperative insurance solutions that are available to all Filipinos,” Go said. To enhance accessibility, the IC has also introduced micro-takaful products designed to be affordable for the Islamic community.

The government is also looking to deepen capital markets following the country’s first sukuk bond issuance in December 2023.

According to the DOF chief, the government is “actively exploring future issuances in the Islamic bond market” after its maiden sukuk sale drew strong demand, with orders nearly five times oversubscribed.

“This allowed the government to secure favorable terms to raise funds for public projects, while providing the Islamic community with a meaningful opportunity to invest,” Go added.

Supporting these financial products is a push for tax neutrality by the Bureau of Internal Revenue (BIR). By aligning the tax treatment of Islamic and conventional products, the BIR aims to “remove structural disadvantages, encourage banks and investors to participate, and support financial inclusion.” - Derco Rosal