MICROCAPITAL BRIEF: The Philippines Passes Law to Encourage Islamic Finance

President Rodrigo Duterte of the Philippines recently signed a law mandating Bangko Sentral ng Pilipinas (BSP), the nation’s central bank, to provide for the regulation and supervision of Islamic banks. An Interagency Working Group on Islamic Banking and Finance will work to develop a regulatory framework, which is intended to expand the number of banks in the country that operate in accordance with Shariah principles. Islamic finance typically prohibits conventional interest charges, which are often replaced with profit-sharing arrangements. The Al-Amanah Islamic Investment Bank of the Philippines reportedly is the only Islamic lender operating in the country.

BSP Deputy Governor Diwa Guinigundo was quoted as saying, “There are still segments of the population that are outside the conventional banking framework, so implementing this Islamic Banking law to include into the mainstream banking framework will definitely provide for greater financial inclusion among the population.”

This development follows the establishment of the Bangsamoro Autonomous Region, the country’s only Muslim-majority region. Approximately 10 percent of the Filipino population is Muslim.

Established under the provisions of the New Central Bank Act of 1993, BSP is headquartered in Manila and has three regional offices and 18 branch offices. In addition to conventional central banking activities, BSP participates in advocacy programs concerning microfinance, financial education and consumer protection. As of 2018, BSP reported total assets of PHP 4.9 trillion (USD 94 billion).

By Anna Gravois, Research Associate

Sources and Additional Resources

International Investment article
https://www.internationalinvestment.net/news/4004504/philippines-revitalises-islamic-banking-boost-financial-inclusion

BSP press release
http://www.bsp.gov.ph/publications/media.asp?id=5112

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