In a statement, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Republic Act No. 11439—officially named "An Act Providing for the Regulation and Organization of Islamic Banks"— "will unlock the full potential of Islamic financing in fostering inclusive economic growth."
"There are still segments of the population that is outside the conventional banking framework so implementing this Islamic Banking law to include into the mainstream banking framework will definitely provide for greater financial inclusion among the population," BSP Deputy Governor Diwa Guinigundo told local media.
[New law] will unlock the full potential of Islamic financing in fostering inclusive economic growth"
Guinigundo also pointed out that Islamic Banking will help boost foreign direct investment inflows.
"I think even at the beginning of the Duterte administration, there were already queries coming from some jurisdictions whose population is mostly Islamic and therefore to the extent that some countries are interested in bringing their business here through Islamic means," he explained.
Around 10% of the Filipino population is Muslim, and most are located in the southern island group of Mindanao. The law comes after the Bangsamoro Autonomous Region, the country's sole Muslim-majority region, was established earlier this year.
Currently the Al-Amanah Islamic Investment Bank of the Philippines is the only Islamic lender operating in the country.
Under the new law, Islamic banks will be able to carry out the business in accordance with Shari'ah principles, in addition to the general powers granted to corporations. In line with this, Islamic banks may provide Shari'ah-compliant financing contracts and structures and undertake various investments in all transactions allowed by Shari'ah principles.
The legislation is also expected to pave the way for the entry of foreign Islamic banks into the Philippines.
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.
An Interagency Working Group on Islamic Banking and Finance has been constituted to develop a regulatory framework for Islamic banking.