The Bangko Sentral ng Pilipinas (BSP) has been actively promoting both Islamic banking and finance, saying that it is both for Muslims and non-Muslims, and for both local and foreign clients.
In an interview with PTV “Laging Handa” program on Tuesday, Jan. 24, BSP Assistant Governor Arifa A. Ala said that the central bank aims to create an Islamic banking sector than can operate successfully alongside conventional banks and that it is ensuring that Islamic banking and finance can easily enter the local financial system.
“The objective of the government is to establish a level-playing field for both conventional and Islamic banking system in the Philippines,” she said.
Ala adds that the flexibility of the Islamic banking law will allow Islamic banks to provide both Muslims and non-Muslims financial products that can serve their requirements, through full-fledged Islamic banks or Islamic banking units (IBUs) of conventional banks.
Depositors in Islamic banks are “investors rather than lenders” compared to conventional banks where they are “just lenders”. In addition, Islamic banks have risk sharing or profit and loss sharing, whereas conventional banks pay fixed interest on deposit liabilities and charge interest on loans. A non-Muslim bank is also “exposed to assets and liabilities mismatch risk” while an Islamic bank’s assets and liabilities are “better matched”.
The Islamic Banking Law or Republic Act No. 11439 was enacted in 2019. However, the BSP only started the creation of the Shari’ah Supervisory Board (SSB) in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) last year. The SSB was established to promote Islamic finance and Islamic banking, functioning primarily to issue Shari’ah opinions on Islamic banking transactions and products in the region.
The sole Islamic bank operating in the Philippines at the moment is the government-owned Al Amanah Islamic Investment Bank. The Development Bank of the Philippines established it as a subsidiary in 1973 by presidential proclamation.