A Mindanao congressman expects Islamic banking to take shape this year, bringing financial services to millions of “unbanked” Muslims in the south.
Islamic banking refers to a non-interest banking system based on the principles of Islamic or Shari’ah law and guided by Islamic economics.
“2020 will mark the start of a surge in finance and banking in Mindanao with Bangko Sentral ng Pilipinas approval of initial regulations implementing the new Islamic Banking Law or Republic Act 11439,” Agusan del Norte First District Rep. Lawrence Fortun said in a statement.
BSP Governor Benjamin Diokno said the new regulation would “widen opportunities for Muslim Filipinos, including those from the Bangsamoro Region, in accessing banking products and services. This is a great stride in our financial inclusion mandates.”
Fortun agreed, saying “with the new law and rules, the Islamic banks can soon reach out to the millions of ‘unbanked’ Filipinos”.
“Most of the unbanked towns are in Mindanao,” said the Mindanaoan solon from the CARAGA region.
Fortun, a member of the House committee on banks and financial intermediaries said, “the BSP was swift and wise to approve the Islamic banking rules before yearend.”
President Rodrigo Duterte signed RA 11439 into law on Aug. 22, while the BSP recently approved the introductory regulations on Islamic banking in the country.
“Foreign and local investors eyeing new investments in Islamic banking and finance now have the go-signal to move forward with their plans for Mindanao and cities where there are concentrations of Filipino Muslims and Muslim expatriates,” Fortun said.
“RA 11439 is one significant legislative accomplishment for inclusive economy of the 17th Congress,” he said.
The Monetary Board, the policy-making body of the BSP, approved the introductory regulations on Islamic banks and the establishment of Islamic banking units in the country to encourage wider investor and consumer participation.
The preliminary policy initiatives jumpstart the implementation of RA 11439 and the relevant provisions on Islamic banking under RA 11054, also known as the Organic Law for the Bangsamoro Autonomous Region in Muslim Mindanao.
RA 11439 which became effective on Sept. 15, 2019 provides the BSP with the legal authority to issue a broader set of rules and regulations on Islamic banking.
“The BSP aims to create an enabling environment that will allow Islamic banks to operate alongside the conventional banks under the same regulatory and supervisory approach, taking into consideration the unique features of the Islamic banking operations,” the Monetary Board said.
“The goal is to provide a coherent, consistent and comprehensive set of regulations and standards to encourage wider investor and consumer participation on Islamic banking and finance without any regulatory arbitrage,” it said.
The regulations, which resounded the BSP’s promotion of strong corporate governance and consumer protection, cover the licensing framework on the establishment of Islamic banks and Islamic banking units and the BSP’s expectations on the Shari’ah Governance Framework for Islamic banks and Islamic banking units.
The law allows other Islamic banking players, either full-fledged Islamic banks or Islamic banking windows, to operate in the Philippines, subject to the approval of the Monetary Board. Conventional banks, whether domestic or foreign banks, will be allowed to open Islamic banking unit or to establish a subsidiary Islamic bank.
Foreign banks can also operate in the Philippines under any of the modes of entry provided under RA 7721, as amended.
RA 11439 states that it is the responsibility of an Islamic bank to ensure its compliance with Shari’ah principles. The Islamic bank will constitute its Shari’ah Advisory Council composed of persons who are qualified and have knowledge or experience in Shari’ah and in banking, finance, law or such other related disciplines.
