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The House Committee on Banks and Financial Intermediaries on Tuesday approved a substitute bill that seeks to regulate and organize Islamic banks and attract investments in the country’s banking sector.
The unnumbered bill, authored by Speaker Gloria Macapagal-Arroyo and Rep. Sitti Djalia Turabin-Hataman of AMIN partylist, recognizes the vital role of Islamic banking and finance as well as the creation of opportunities for “greater financial inclusion” especially for the under-served Muslim population.
The measure refers to an Islamic bank as a business whose objectives and operations do not involve interest (riba), which is prohibited by the Shari’ah and which conducts its business transactions in accordance with Shariáh principles.
The bill provides that the Monetary Board (MB) may authorize the establishment of Islamic banks. The MB may authorize conventional banks to engage in Islamic banking arrangements, including structures and transactions, through a designated Islamic banking unit within the bank provided that the unit is separate from its conventional banking transactions.
The measure also allows the MB to authorize a foreign Islamic bank to establish banking operations in the Philippines under any of the modes of entry provided under Republic Act 7721, or “An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for Other Purposes”, as amended.
The bill said the Bangko Sentral ng Pilipinas (BSP) shall regulate and supervise the operations of Islamic banks. Islamic banks shall be licensed and regulated in the same manner as a universal bank. The BSP shall also issue the necessary rules and regulations on Islamic banking.
Moreover, it will be the responsibility of an Islamic bank to ensure its compliance with Shari’ah principles. It shall constitute its Shari’ah advisory council composed of persons who are qualified in the Shari’ah or who have knowledge or experience in Shari’ah banking, finance, law, or such other related disciplines.
Islamic banks may perform the following services: accept saving accounts for safekeeping or custody with no participation in profit and loss except unless otherwise authorized by the account holders to be invested; act as correspondent of banks and institutions to handle remittances or any fund transfers; accept drafts and issue letters of credit or letters of guarantee, negotiate notes and bills of exchange and other evidence of indebtedness; provide financing with or without collateral by way of leasing, sale and leaseback, cost-plus profit sales arrangements, and other Shari’ah compliant financing contracts and structures; and other banking services as may be authorized by the MB.
Islamic banks created under the proposal shall comply and conform with pertinent laws, rules, and regulations applicable to private corporation engaged in banking, such as the Corporation Code of the Philippines, and the requirements of the respective regulatory agencies.
Rep. Ben Evardone of Eastern Samar, chairman of the banking committee, said the approval of the substitute bill will complement the Bangsamoro Organic Law.
“This will help further the efforts to help our Muslim brothers in Mindanao and elsewhere in the country,” said Evardone.
Rep. Henry Ong of Leyte, vice chairman of the Committee on Banks and Financial Intermediaries, said upgrading and expanding Islamic banking and finance will help spur economic growth in the Bangsamoro Autonomous Region, as well as in Filipino-Muslim communities in Metro Manila and other urban areas nationwide.
“I am especially concerned and mindful of the necessity of financial inclusion to also cover Filipino-Muslims. Inclusion must include convenience, transparency, portability, and privacy security,” Ong added.
The Senate has one bill on Islamic Banking filed by Senator Paolo Benigno Aquino IV.