Philippines Central Bank Issues Islamic Finance Rules

Bangko Sentral ng Pilipinas aims to issue new implementation rules regarding Islamic finance before the end of the year and potentially allow banks to establish separate subsidiaries for the new business line.

The BSP is pushing for an open approach where conventional banks can operate Islamic banking windows or establish subsidiary Islamic banks, BSP deputy governor Chuchi Fonacier said in a report, adding that she wants to issue implementation rules before the end of the year.

Fonacier’s statement was made close on the heels of the Filipino government’s enactment of a law to promote Islamic finance which was signed by President Rodrigo Duterte in late August.

BSP governor Benjamin E. Diokno said the law would «unlock the full potential of Islamic financing in fostering inclusive economic growth» highlighting the opportunity to access the banking system for Muslim Filipinos, particularly in the southern autonomous Bangsamoro Region. Fonacier echoed the sentiments adding that foreign Shariah-compliant banks would also be allowed to operate in the Philippines.

Islamic banking in the Philippines is promising, she said.

Despite a sizeable ten percent minority of Filipinos being Muslims, banking services catered to the segment’s needs remain limited. Of the country’s 45 universal and commercial bank groups only one – the Al-Amanah Islamic Investment Bank of the Philippines – operations in compliance with Shariah principles.