BSP says Islamic banking to boost financial inclusion

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) said the Islamic banking bill passed by the Senate on third and final reading is a game-changing legislation that would boost the government’s financial inclusion agenda.

BSP Governor Benjamin Diokno said the bill would expand Islamic banking in the country serving more Filipino Muslims.

“It allows Islamic banks to perform banking services and gives BSP regulatory powers and supervision over their operations. More importantly, this recognizes the vital role of Islamic banking and finance and helps our financial inclusion agenda,” Diokno added.

On Monday, the Senate approved House Bill 8281 titled An Act Providing for the Regulation and Organization of Islamic Banks on third and final reading.

Under the bill, a legal and regulatory framework would be established to develop Islamic banking in the country under the supervision and regulation of the BSP’s Monetary Board.

Once the law is passed, the central bank would issue the implementing rules and regulations on Islamic banking.

The Monetary Board, on the other hand, would regulate the number of participants in the Islamic banking system, while considering requirements of the economy.

Under the proposal, Islamic banks would provide services like conventional banks such as acceptance or creation current, savings, and investment accounts; acceptance of foreign currency deposits; and act as correspondent of banks and institutions to handle remittances or any fund transfers.

Al-Amanah Islamic Investment Bank (AIIB), established in 1973 to fund projects in conflict-affected areas in Mindanao, is the first and only Islamic bank in the country.

State-run Development Bank of the Philippines (DBP) took over the bank in 2008 by acquiring the shares of the national government as well as that of pension fund managers Government Service Insurance System (GSIS) and Social Security System (SSS).

DBP has been pushing for the enactment of an Islamic Banking and Financing Framework to enable foreign Islamic financial institutions to invest in AIIB.

Islamic banking offers no interest rate and the Shariah law governs the arrangement between lender and borrowers.