As the regulator of banks, the Bangko Sentral ng Pilipinas (BSP) plays a key role in the development of Islamic banking and finance in the country.
BSP Assistant Governor Arifa A. Ala said having more Islamic banks—either stand-alone or units within existing conventional banks—will help create a financial landscape that caters to the varied needs of all Filipinos.
“We want Islamic banks to viably operate alongside conventional banks. We envision a banking system where diverse players thrive,” Assistant Governor Ala explained.
She said the central bank has undertaken several initiatives to promote Islamic banking anchored on two-pronged strategies—first, adopting a single regulatory approach for both conventional and Islamic banks and second, rolling out more capacity-building activities to boost investor and consumer awareness and acceptance of Islamic banking.
To date, the BSP has issued essential regulations to jumpstart the Islamic banking industry. These include Circular No. 1069, which specifies licensing requirements for Islamic banks and Islamic banking units of conventional banks; and Circular No. 1070, which provides guidance on the minimum supervisory expectations on Shari’ah governance frameworks of Islamic finance institutions.
The BSP issued Circular No. 1116, that emphasizes Shari’ah governance in liquidity risk management by Islamic banks and Islamic banking units, and Circular No. 1139, which identifies reporting requirements for Islamic banking and finance transactions or agreements.
To further strengthen supervision of Islamic banks, the BSP issued a joint circular with the Department of Finance, the National Commission on Muslim Filipinos, and the Bangsamoro Government, for the establishment of the Shari’ah Supervisory Board (SSB) in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM). The SSB has the authority to issue opinions on Islamic banking transactions and products in the BARMM or, when requested by the BSP, financial institutions and other stakeholders outside the jurisdiction of the BARMM.
Assistant Governor Ala also cited as a challenge the low public awareness and understanding of Islamic banking in the country.
“To address this, capacity-building programs have been undertaken by relevant agencies and institutions to promote Islamic finance,” the BSP official said.
“As we move forward with our information drive, we expect more Filipinos to gain an understanding and appreciation of Islamic banking,” she added.
On Oct. 19, 2021, the BSP signed a memorandum of understanding (MOU) with the Philippine Economic Zone Authority for the establishment of green ecozones and halal hubs in the country. The MOU also includes the provision of access to Shari’ah-compliant products and services in halal ecozones.
In December of the same year, the BSP and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) signed an MOU to advocate a stronger Islamic banking and finance industry in the country.
Further, the BSP issued Circular No. 1173 on April 19, 2023 on the modified minimum capitalization requirement for conventional banks with Islamic banking unit (IBU). This policy provides more flexibility in licensing of an IBU of qualified conventional banks.
Through its coordination with various agencies and other stakeholders, the BSP continues to drum up its initiatives to promote Islamic banking and create a level playing field among financial institutions.
