THE BANGKO SENTRAL ng Pilipinas (BSP) is looking to develop the regulatory landscape for Islamic banking in the country to make it thrive in the “new normal.”
“The BSP is continuously finding ways of doing things under the new normal and working on more policy issuances which are supportive of the Islamic banking and finance in the Philippines,” BSP Managing Director Arifa A. Ala, said in behalf of Deputy Governor Chuchi G. Fonacier, at a virtual briefing on Tuesday.
Republic Act No. 11439 signed in August 2019 provided for the regulation and organization of Islamic banks in the country. The law mandates the BSP as the regulatory body in charge of authorizing Islamic banks or banking units in the market.
Following the law’s enactment, the central bank in December 2019 issued BSP Circular 1069 which provided the guidelines for the establishment of Islamic banks and banking units, and BSP Circular 1070 that laid down the Shari’ah governance framework.
Ms. Ala said the BSP is working with the Bangsamoro Government, the Department of Finance, and the National Commission on Muslim Filipinos to develop the Shari’ah Supervisory Board in the Bangsamoro region, which they hope to be finalized within the year.
“We now have the much awaited and much needed regulatory framework and supporting environment to usher in a vibrant Islamic finance industry marked by multiplicity of players,” Ms. Ala said.
She added that the general principle of tax neutrality provided by revenue regulations of the Department of Finance and the Bureau of Internal Revenue last year will help promote a level playing field for Islamic banking products and services.
“Previously, the lack of tax neutrality was considered a primary hurdle that must be addressed to ensure a sustainable Islamic finance industry,” she said.
Al-Amanah Islamic Bank is currently the only Islamic bank in the country. It has been under the control of the Development Bank of the Philippines since 2008.
Islamic banks operate under Shari’ah principles, including the non-involvement of “riba” or interest. These lenders can also issue Shari’ah compliant funding instruments such as “sukuk” upon approval by the Monetary Board.
Entities looking to enter the Islamic banking industry in the country should start with offerings that have price ranges close to conventional bank products and services, Shafiq Dhanani, president of microfinance firm MBK Ventura Indonesia, said.
“Pricing should be equivalent or lower than conventional products because people are not familiar with Shari’ah financing and if the pricing is high then it will not attract clients,” Mr. Dhanani said.
Ms. Ala earlier said a number of players have expressed interest in establishing Islamic banks and banking units in the Philippines. However, no applications have been filed yet amid the pandemic. — L.W.T. Noble