By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) will fast-track the issuance of regulations and rules for the development of Islamic finance in the country as soon as President Duterte approves and signs the Islamic Banking Law.
BSP Governor Benjamin E. Diokno has identified the implementation of the Islamic Banking Law as one of his term’s key directions in the next years.
He said the bill, which has been passed by both houses of Congress, “seeks to put in place a sound legal and regulatory framework for the development of Islamic banks in the country” and once implemented, the law “paves the way for the entry of Islamic banks to operate in the Philippines.”
Diokno said he considers its implementation a challenge and expects an increase in foreign direct investments (FDI) from Muslim countries now that the government will have a framework for Islamic banking in the Philippines.
“We will issue circulars (once) done,” he said, and this will be issued “within months” after the approval and signing of the Islamic banking bill.
Globally, Islamic finance is worth about $2 trillion. Islamic funds are invested in Sukuk bonds and Halal sectors, among others.
The framework for Islamic banking has been part of the proposed changes to the BSP Charter. The amended BSP law was finally approved last February as Republic Act No. 11211 and a new section provides financial facilities for Islamic banks. This will allow the entry of more Islamic banks in the country.
Based on the new BSP Charter, it will take into consideration “the peculiar characteristics of Islamic banking” and that it may formulate rules and regulations for the extension of financial facilities to Islamic banks “provided such exposures shall be properly secured.”
During the press briefing after the 2019 Pre-SONA economic conference, BSP Deputy Governor Diwa C. Guinigundo, officially retired yesterday after 41 years in the central bank, said the Islamic banking bill is now being prepared for enrollment before it is submitted to Malacanang for approval and signature of President Duterte.
Guinigundo said the development of Islamic banking sector will greatly enhance and expand financial inclusion in the country. About 12-15 percent of the 105 million Filipinos are Muslims.
“(We) still have segments of the population that are outside of the conventional banking framework, so implementing this Islamic Banking Law to include more into the mainstream banking framework will defintely provide for greater financial inclusion among the population,” said Guinigundo.
The entry of any foreign banks usually bring in FDI and for Islamic investments, it is expected to be significant when the law is implemented.
Guinigundo said the BSP has been receiving interests from Islamic banks for years but that they could not come in because there was no working framework for entry.
“Even from the beginning of the Duterte administration, there were already queries coming from some jurisdictions whose populations are mostly Muslims or Islamic, and therefore to the extent that some countries are interested in bringing their business here through Islamic means it could really provide additional support and incentive for FDI in coming here,” said Guinigundo.