The Bangko Sentral ng Pilipinas (BSP) on Friday welcomed the enactment of a law putting Islamic banks under its regulation and supervision.
Republic Act No. 11439 or “An Act Providing for the Regulation and Organization of Islamic Banks” was signed by President Rodrigo Duterte on August 22, the central bank said Friday.
Malacañang released a copy of RA 11439 to reporters on Friday.
The measure mandates the BSP to exercise regulatory powers and supervision over the operations of Islamic banks and to issue the implementing rules and regulations on Islamic banking.
“RA No. 11439 will unlock the full potential of Islamic financing in fostering inclusive economic growth. With a well-defined regulatory framework now in place, the BSP looks forward to seeing greater participation in Islamic financing by both domestic and foreign banks,” BSP Governor Benjamin Diokno said.
“This is expected to 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,” he added.
In the Philippines, the potential market for Islamic banking products mainly comprises the Muslims which account for about 10% of the population, the BSP noted.
Islamic banking and finance can also be attractive to non-Muslims, particularly investors within or outside the Philippines who may be looking for new asset classes, instruments and products to diversify their portfolios, it said.
The law will take effect 15 days after its publication in the Official Gazette or in a newspaper of general circulation.
Islamic banking business is defined under RA No. 11439 as a banking business with objectives and operations that do not involve interest (riba) as prohibited by the Islamic or Shari’ah Law and which conducts its business in accordance with the principles of the Shari’ah.
Under the new law, Islamic banks shall have such powers necessary and prudent to carry out the business of a bank in accordance with Shari’ah principles, in addition to the general powers granted to corporations.
Islamic banks may provide Shari’ah compliant financing contracts and structures and undertake various investments in all transactions allowed by Shari’ah principles.
An Interagency Working Group on Islamic Banking and Finance has been constituted to develop a regulatory framework for Islamic banking.
The group comprises officials from the following stakeholders and regulators:
- Department of Finance
- Insurance Commission
- Bureau of the Treasury
- Asian Development Bank
- Bureau of Internal Revenue
- Securities and Exchange Commission
- Financial Reporting Standards Council
- National Commission on Muslim Filipinos
- Philippine Deposit Insurance Corporation
The Bureau of Internal Revenue has completed a draft regulation to implement the provisions on tax neutrality under the law.
Islamic banking and finance promote inclusive finance by making it available to groups that avoid using existing conventional banking facilities due to their faith, according to the BSP.
“The BSP shall continue to pursue measures that enhance access to quality financial products and services as well as foster the overall welfare of financial consumers. These measures include amendments to the Bank Deposit Secrecy laws, the Financial Consumer Protection bill, and Agricultural Financing reforms,” Diokno said. —VDS, GMA News