With the approval of a new Islamic banking law in the Philippines by the country’s central bank last December, doors are now open for both domestic and foreign banks to open a Islamic banking window or to establish a subsidiary Islamic bank in the country with millions of under- or unbanked Muslims, especially in the southern region of Mindanao.
“The Bangko Sentral ng Pilipinas aims to create an enabling environment that will allow Islamic banks to operate alongside conventional banks under the same regulatory and supervisory approach, taking into consideration the unique features of the Islamic banking operations,” the central bank said in a statement.
Economists and lawmakers praised the decision, saying that the law will lead to a “finance and banking surge” in undersupplied Mindanao this 2020 and “unlock the full potential of Islamic financing in fostering inclusive economic growth.”
The entry of a new bank with Islamic banking services, however, remains subject to the approval of the central bank’s monetary board. In the absence of a central regulatory entity on Shariah-compliance in the Philippines, the law further states that it is the responsibility of an Islamic bank, or window, to ensure its compliance with Shariah principles. Like in other Muslim nations without a central regulatory Shariah board, Islamic banks in the Philippines will have to constitute their own Shariah advisory council comprising persons “who are qualified and have knowledge or experience in Shariah and in banking, finance, law or other related disciplines.”—Agencies