THE BANGKO SENTRAL ng Pilipinas (BSP) is leaning toward allowing local lenders to set up Islamic banking subsidiaries, as it steps up efforts to promote Shariah-compliant finance in the country.

“The BSP is pushing for an open approach where conventional banks can operate Islamic banking windows or to establish subsidiary Islamic banks,” the central bank’s Deputy Governor Chuchi G. Fonacier told Bloomberg News via e-mail.

The government passed a law in August to promote Islamic finance, which represents a small proportion of the banking industry even though about 10% of the population is Muslim.

The country has 45 universal and commercial bank groups, only one of which — the Al-Amanah Islamic Investment Bank of the Philippines — operates under Shariah principles.

The August law said local banks may be allowed to “engage in Islamic banking arrangements” but left it up to the central bank to work out the details.

Operating fully fledged subsidiaries would allow lenders to offer a wider range of Shariah-compliant services than through a window, which remains part of the parent bank.

The BSP wants to issue the implementing rules for the new law before the end of the year, Fonacier said. Foreign Shariah-compliant banks will also be allowed to operate locally, she added.

“Islamic banking in the Philippines is promising,” she said. — Bloomberg