Philippines moves closer to finalizing legal framework for Islamic banking system

The Philippine government is currently working on legislation for the development of Islamic finance and a framework that would allow the country to create more Islamic banks, to reach out to its underfunded Muslim community of at least 10 million. 39; euros and issue government or corporate Islamic bonds, or sukuk, in accordance with President Rodrigo Duterte's economic reform program to promote the Islamic finance industry in the country.
According to Benjamin Diokno, Finance Secretary of the Budget and Management Department of the Philippines, the Administration's financing strategy aims to "continuously diversify the country's investor base" and to look for ways to finance the program. infrastructure "Build, build, build" of Duterte. Above all, the issuance of sukuk would allow the country to tap into the funds of the 57 member countries of the Organization of Islamic Cooperation.
The initiative is supported by the Asian Development Bank, which earlier this year granted "technical badistance" to develop Islamic finance in the country. In April 2018, the Philippine Central Bank was tasked with contributing to the establishment of a regulatory framework for Islamic finance and strengthening the regulatory and market capacity for the provision of Islamic financial services. The central bank is expected to exercise regulatory powers and oversee the future operations of Islamic banks. The goal is to finish it by December 2019.
The new legislation, in general, aims to strengthen inclusion and promote financial opportunities for underserved Muslim populations by allowing the creation of more Islamic banks, including the entry of foreign Islamic banks in the Philippines and conventional banks for the creation of Islamic banks. Windows with full banking services for individual and corporate customers. This would also provide a legal framework for the issuance of sukuk, Sharia-compliant financing contracts, commodity financing and the issuance of shares, among others. It would also allow Muslim investors to participate in the domestic capital market.
This initiative is also expected to strengthen the role of Islamic Investment Bank Al-Amanah (Philippines), the first and only lender to comply with sharia law in the country, under the aegis of the Development Bank. of the Philippines, which belongs to the state. Bill 8281, which seeks to amend the charter of Al Amanah Bank, has already been approved at second reading last week, while its counterpart, Senate Bill 668, is still pending. . Diokno said the legislative process could take another year to become a reality and that sukuk emissions could not be expected before early 2020 at the earliest.
In addition to financing the "Build, Build, Build" program through an additional secured or badet-backed financing structure, the sukuk would also be used to rebuild and rehabilitate the torn city of Marawi. war in the island of Mindanao, with a southern Muslim majority that was almost completely destroyed by Islamist militants during a five-month battle last year. Islamic financial institutions would also provide Mindanao's businesses with more financing options to develop and, in general, stimulate economic growth in the Southern Autonomous Region, as well as in the Filipino-Muslim communities in the Metro Manila region. other parts of the country.
In turn, Muslim investors and outside bankers, especially those from other Muslim countries in Southeast Asia, the Middle East and North Africa, will have more reasons and incentives. to participate in the growth of the Philippine economy. As soon as the framework is established, the Philippine Investment Board plans to start a tour of presenting the Islamic banking sector in Malaysia, Indonesia, Singapore, Saudi Arabia, the United Arab Emirates, Qatar, and the United States. Morocco, to follow.