BSP to jumpstart Islamic banking in PH

The policy making body of the Bangko Sentral ng Pilipinas has issued regulations to kickstart the implementation of Islamic banking in the country with special emphasis on bringing banking services to the underserved areas of Muslim Mindanao.

And this early, central bank officials said that three banks —including one foreign one — have already expressed interest in entering the market through Islamic banking, which prohibits the charging of interest, but instead obligates borrowers to share their profits with the financial institution.

In a press statement, the central bank said its Monetary Board is bent on pushing for the rapid execution of Republic Act No. 11439, or An
Act Providing for the Regulation and Organization of Islamic Banks and the relevant provisions on Islamic banking under R.A. No. 11054, otherwise known as the Organic Law for the Bangsamoro Autonomous Region in Muslim Mindanao.

“These rules aim to create an enabling environment that will allow Islamic banks to operate alongside conventional banks under the same
regulatory and supervisory approach, while considering the unique features of the Islamic banking operations,” BSP Governor Benjamin
Diokno said.

The regulations, which are consistent with BSP’s promotion of strong corporate governance and consumer protection, cover the licensing
framework on the establishment of Islamic Banks and Islamic Banking Units and the BSP’s expectations on the Shari’ah Governance Framework for these financial institutions.

The BSP’s existing licensing framework on the establishment of conventional banks and branches has been adopted in the regulations, as appropriate, with supplementary requirements relevant to Islamic banking operations and Shari’ah compliance.

The BSP said it aims to provide a coherent, consistent, and comprehensive set of regulations and standards to encourage wider investor and consumer participation in Islamic banking and finance, without any regulatory arbitrage.

“The BSP also promotes financial inclusion by onboarding Muslim Filipinos who do not subscribe to conventional banking,” Diokno said.

The law was signed into law on August 22, 2019 and became effective on September 15, 2019. It provides the BSP with the legal authority to
issue a broader set of rules and regulations on Islamic banking.

Edited by TSB