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Market-driven Islamic banking sought

Posted on February 25, 2013

MONETARY AUTHORITIES could allow the introduction of Islamic banking products -- given the huge market potential -- as long as the framework is "market driven."

"Considering that there’s market potential ... We can look into the possibility of allowing conventional banks to provide Islamic banking products," central bank Deputy Governor Nestor A. Espenilla, Jr. yesterday said.

"However, we have not received any proposal so far," he added.

"Perhaps the problem is a dearth of providers with sound Islamic banking business models," Mr. Espenilla noted.

Al-Amanah Islamic Investment Bank of the Philippines, formed by virtue of Presidential Decree 264 issued by then President Ferdinand E. Marcos, is the only one authorized to service the local Muslim community. Islamic banking adheres to the laws of the Koran and as such does not charge interest.

"[T]hat franchise has not been well-utilized so far," Mr. Espenilla claimed.

Bankers have cited the absence of a regulatory framework as the main hindrance in implementing Islamic finance in the country.

This was noted by Malayan Banking (Maybank) President and CEO Dato’ Sri Abdul Wahid Omar, who said: "We (Maybank) have to expand the current offering that we have ... but the current regulations do not allow that."

"Currently, there is no framework to operate Islamic banking in the Philippines. I guess we need to study the market first, look at the Islamic banking model that will be acceptable for the market and see how it can be implemented in the Philippines," he added.

He noted that the expansion of Islamic banking offerings was relevant given development plans for Mindanao.