The Bangko Sentral ng Pilipinas (BSP) highlighted the Philippines’ vast potential as an investment destination for Islamic finance during the launch of an Asian Development Bank (ADB) report in Makati City on 26 November 2024.
According to BSP Governor Eli M. Remolona, Jr., “The Bangko Sentral ng Pilipinas, with support from the Asian Development Bank, has been fostering a regulatory environment conducive to the growth of the Islamic finance sector.”
In pursuit of this goal, the BSP granted the first Islamic banking unit (IBU)[1] license to a rural bank in June 2023, followed by the issuance of another license to a commercial bank in July 2024. The IBUs of both banks were inaugurated this year, marking the entry of two new players in the Philippine Islamic banking industry.
BSP Deputy Governor Chuchi G. Fonacier noted, “Together, let us leverage on the vast opportunities offered by Philippine Islamic finance and transform it as a cornerstone for an inclusive financial system that leaves no Filipino behind.”
The ADB report titled, “Unlocking the Potential of Islamic Finance in the Philippines: A Market Analysis and Landscape Report,” cited the country’s growing economy; the government’s drive for financial inclusion; the market from 29 percent of unbanked Philippine cities and towns; substantial financing needs of micro, small, and medium enterprises; and strong interest of Filipino businessmen and retail clients in using Islamic financial services.
In her closing message, BSP Assistant Governor Arifa A. Ala also said, “May this event inspire confidence to stakeholders, especially market players and investors, that the presented opportunities in Islamic finance will soon become realities for a more inclusive and prosperous future for the Philippines.”
The report noted regulatory reforms that ensure a level playing field for Islamic and conventional banks, including tax regulations that promote tax neutrality of transactions between Islamic and conventional finance players, among others.
These reforms are reinforced by the creation of the Islamic Finance Coordination forum and operationalization of the Shari’ah Supervisory Board in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM). The forum and the supervisory board ensure close coordination and prioritization of government efforts and initiatives on Islamic finance and provide Shari’ah compliance oversight on matters relating to Islamic banking and finance, respectively.
ADB Co-Team Leader of the Islamic Finance for the Philippines Technical Assistance Asghar Ali Sayed said, “We invite you to explore the insights and recommendations that this report offers, particularly on the compelling investment opportunities that are available. By doing so, you may find a promising path to contribute to the country’s economic development while providing ethical and socially responsible financial solutions to its diverse population.”.
Attendees at the event included His Excellency Dato’ Abdul Malik Melvin Castelino, Ambassador of Malaysia to the Philippines; His Excellency Agus Widjojo, Ambassador of Indonesia to the Philippines; Monetary Board Members Rosalia V. De Leon, Romeo L. Bernardo, Walter C. Wassmer, and Jose L. Querubin; Department of Budget and Management Secretary Amenah F. Pangandaman; BSP Deputy Governor Francisco G. Dakila, Jr., Assistant Governor Veronica B. Bayangos, and Assistant Governor Lyn I. Javier; Securities and Exchange Commissioner McJill Bryant T. Fernandez; District of Basilan Congressman Mujiv S. Hataman, and Isabela, Basilan Mayor Siti Djalia A. Turabin-Hataman.
Also in attendance were representatives from the Department of Finance, Department of Agrarian Reform, Bureau of the Treasury, Insurance Commission, Shari’ah Supervisory Board in the Bangsamoro Autonomous Region in Muslim Mindanao, Committee on Muslim Affairs, Philippine Center for Islam and Democracy, and key stakeholders from the government, financial institutions, and the private sector.
The BSP and ADB presented the same findings at the Islamic finance roadshows in Malaysia and Indonesia in September 2024 to highlight the country’s readiness to welcome global investors.
[1] Under BSP regulations, an IBU is a division, department, office, or branch of a conventional bank that operates in accordance with Shari’ah principles.
