MANILA, Philippines — President Rodrigo Duterte inked a law regulating the operations of Islamic banks in the country in a bid to unlock the full potential of Islamic financing and promote financial inclusion.
In a statement, the Bangko Sentral ng Pilipinas welcomed the signing of Republic Act 11439 or “An Act Providing for the Regulation and Organization of Islamic Banks.”
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The new law, signed by Duterte last Aug. 22, mandates the central bank to exercise regulatory powers and supervision over the operations of Islamic banks and to issue the implementing rules and regulations on Islamic banking.
“This is expected to widen opportunities for Muslim Filipinos, including those from the Bangsamoro Region, in accessing banking products and services,” BSP Governor Benjamin Diokno said.
“This is a great stride in our financial inclusion mandates,” Diokno added.
Islamic banking business, as defined by RA 11439, refers to a banking business with objectives and operations that do not involve interest (riba) as prohibited by the Islamic or Shari’ah Law.
Under the new law, Islamic banks shall have to carry out the business of a bank in accordance with Shari’ah principles, in addition to the general powers granted to corporations, the BSP explained.
In line with this, Islamic banks may provide Shari’ah compliant financing contracts and structures and undertake various investments in all transactions allowed by Shari’ah principles.
According to the BSP, Islamic banking and finance promote inclusive finance by making it available to groups that avoid using existing conventional banking facilities due to their faith.
In the Philippines, the potential market for Islamic banking products mainly comprises the Muslim population which account for about 10% of the Filipinos.
Islamic banking and finance 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 in their aim to diversify their portfolios.