Bangko Sentral ng Pilipinas (File photo / Philippine Daily Inquirer)
The Bangko Sentral ng Pilipinas (BSP) had given licenses to two companies to open Islamic banking windows (IBW) in the Philippines amid a strong regulatory push to develop a vibrant Islamic banking ecosystem in the country.
Speaking to reporters on the sidelines of an event hosted by the Chamber of Thrift Banks, BSP Deputy Governor Chuchi Fonacier said the central bank approved the applications of MayBank Philippines and another company to establish their own IBWs. Fonacier declined to name the other firm.
READ: Regulatory push seen attracting interest in PH Islamic banking
An IBW license allows conventional financial institutions to conduct Islamic banking operations by setting up a subsidiary that offers Shari’ah-compliant financing.
“It’s already approved for both,” said Fonacier, head of the BSP’s financial supervision sector, which is mainly responsible for the regulation of banks.
Prior to the approvals, there were only two players in the Islamic banking sector: Al-Amanah Islamic Investment Bank of the Philippines and the Islamic branch of the Center for Agriculture and Rural Development (CARD) Bank Inc.
In 2019, former President Rodrigo Duterte signed Republic Act (RA) 11439 which mandates the BSP to exercise regulatory powers and supervision over the operations of Islamic banks.
Islamic banking, as defined in RA 11439, refers to a banking business with objectives and operations that do not involve interest (riba) that is prohibited by the Islamic or Shari’ah Law, and which conducts its business following the principles of the Shari’ah.
READ: Maybank Philippines eyeing Islamic banking license from BSP
The lack of a legal framework and necessary infrastructure in the past had hampered the development of a dynamic Islamic banking ecosystem in the Philippines, where the Muslim population accounts for about 10 percent of Filipinos.
BSP data showed that 29 percent of the cities and municipalities in the Philippines remain unbanked, with the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) being the most unbanked region.
Islamic banking and finance can promote inclusive finance by making it available to groups that avoid using existing conventional banking facilities due to their faith. It can also be attractive to non-Muslims, particularly investors within or outside the Philippines who may be looking for new asset classes, instruments, and products to diversify their portfolios.