THE House Committee on Banks and Financial Intermediaries has created a technical working group (TWG) to further study how the government can strengthen the Islamic banking in the Philippines.
The TWG was created after the Bangko Sentral ng Pilipinas (BSP) presented to the committee the status, trends, challenges and opportunities of Islamic banking in the country and its global implications during the recent deliberation of House Bill (HB) 5989.
“We need to set up a more dynamic and responsive national regulatory framework on Islamic banking,” the central bank admitted.
In HB 5989, Party-list Rep. Sitti Djalia Turabin-Hataman of Anak Mindanao pushed for an increase in the number of Islamic banks and conventional banks that can operate Islamic banking windows to achieve a genuine and productive economic activity in the country.
“There is a need to review and amend the said law, for the country to significantly participate in the recent global developments in Islamic banking and provide regulatory frameworks and policies for local banks and financial institutions to engage in Islamic banking,” the lawmaker said.
Hataman said the measure provides the framework and infrastructure for the country to engage in this rising global phenomenon, develop competencies among Filipinos and popularize the concept of Islamic banking in the country.
She added that its passage is significant for the country, “as we position ourselves as a major player in the Asean [Association of Southeast Asian Nations] integration.
Liberal Party Rep. Sonny Collantes of Batangas, chairman of the House Committee on Banks and Financial Intermediaries, said the bill is “very timely in order to make the country’s growth inclusive and sustainable.
Party-list Rep. Agapito Guanlao of Butil said that he sees Islamic banking as an alternative financing service that will address the financing requirements of the agriculture sector.
The measure seeks to amend Republic Act 6848, or Charter of Al Amanah Islamic Investment Bank of the Philippines, and providing for the regulation and organization of an expanded Islamic banking system in the Philippines.
The Al-Amanah Islamic Investment Bank, which was established in 1974, is one of the oldest Islamic banks in the world, making the Philippines a pioneer in Islamic banking.
Currently there are at least 700 Islamic financial institutions operating in more than 70 countries, with the industry registering an annual growth rate of 16.94 percent from 2009 to 2013.
Hataman said the key stakeholders in the government and private sector must work together to increase financial facilities in the country for financial inclusion and encourage more inflows from foreign investors.
“Islamic banks, both local and foreign, can operate in the Philippines provided that they are universal banks. Existing local banks can also operate Islamic banking units,” she said.
Hataman, citing the BSP guidelines on universal banks, said that setting up a new Islamic bank requires capitalization of P5 billion.
“We’d like to invite everyone, Muslim and non-Muslims, to take a closer look at Islamic banking as an alternative financing modality, instrument and facility. This is very good for the economy considering the enormous potentials of the Halal industry. As we enter Asean integration, we need to attain financial inclusion for the Muslims in the country,” she said.
Meanwhile, Senior State Solicitor Maisara Dandamun Latiph, lead convenor of the TWG that drafted the measure, said, “This bill is a product of convergence of different agencies and sectors. We look forward to its passage to strengthen ethical banking in the country through socially responsible funds and investments. It aims to allow the growth of Islamic banks, paving the way for other investors both local and international.”
Nataliya Mylenko, World Bank senior financial sector specialist, also, reiterated the significance of Islamic banking in light of the Asean integration.
Mylenko added the potential of Islamic banking and finance in the areas of microfinance and available financing products for small and medium enterprise.
Zamir Iqbal, head of the World Bank Global Islamic Finance Development Center, emphasized that Islamic banking is not exclusive to Muslims and is in fact a growing global industry even in non-Muslim countries like the United Kingdom, Germany, France and Africa.
“From a mere $150-billion industry in the mid 1990s, Islamic finance is now worth $1.8 trillion with presence not just in the Gulf areas, but even in Europe, Africa and Southeast Asia,” Zamir said.
“Islamic banking may also be termed structured financing, participation banking, partnership finance. Most people think it is only about being interest-free, but that is less than half of what it is all about,” he said.