Briefing on the Amendments to the BSP Charter

20 September 2019, Cebu City

FINANCIAL SUPERVISION SECTOR

Strengthening Islamic Banking in the Philippines

20 September 2019
BSP Task Force on Islamic Banking
Presentation Outline
1 • challenges addressed

2 • background on Islamic banking

3 • promoting Islamic banking and finance

4 • expanded Islamic banking system

5 • opportunities

6 • to jumpstart
1 challenges addressed…

R.A. No. 11439

Lone Islamic bank Lack of legal and An Act Providing for the
regulatory Regulation ad
framework Organization of Islamic
Banks
Signed on 22 August 2019

Tax Disparities Scarce capacity

and awareness
2 background on Islamic banking
• Conduct of banking/finance operations in
consonance with Shari’ah principles (grouped into five
categories - profit-loss sharing, sale and purchase, fee-based, free service, ancillary service)

• Basic Characteristics
Prohibits the undertaking or financing of anti-social &
unethical businesses (e.g. gambling, prostitution, alcoholic liquor, nightclubs
and narcotics)
Prohibits interest or a fixed pre-determined rate of
return or riba (Principle of Risk-Sharing)
Requires compliance with Shari’ah (based on equitable distribution
of wealth)
2 background on Islamic banking
Conventional Banking vs. Islamic Banking

• Depositors are lenders • Depositors are investors

rather than lenders
• Bank pays fixed interest on
deposit liabilities while • Risk sharing through profit
returns on assets are and loss sharing
uncertain

• Bank is exposed to assets • Assets and liabilities are

and liabilities mismatch risk. better matched.
3 promoting Islamic banking and finance
Provide level playing
field

Build broader
customer and asset
base; increase investor
How to Build pool of experts
on Islamic Banking
awareness and promote IBF? and Finance
acceptance

Establish clear legal and

regulatory framework
4 expanded Islamic banking system

Shari’ah
compliant

Principles-
Tax neutrality based rules and
standards
Islamic
banking
system
Stronger risk Financial
management stability
Establishment
of other
Islamic banks
5 opportunities
• Developing Islamic Banking and Finance in the
Philippines can promote inclusive finance
• It may also trigger inflows of foreign investments
which can in turn be deployed in building
necessary infrastructures
– ASEAN Integration
– Further liberalization of entry of foreign banks in the
country – RA 10641, An Act Allowing the Full Entry of
Foreign Banks in the Philippines
6 to jumpstart….
• Licensing of new Islamic banks
• Emphasis on the Shari’ah Governance Framework
• Prospective maiden sovereign Sukuk issuance
• Implementing rules and regulations on tax
neutrality
 Briefing on the Amendments to the BSP Charter
20 September 2019, Cebu City

FINANCIAL SUPERVISION SECTOR

Strengthening Islamic Banking in the Philippines

20 September 2019
BSP Task Force on Islamic Banking