MANILA, Philippines — As part of a whole-of-government initiative to stimulate investment in Islamic banking,…
Everyone can engage in Islamic banking: Exec of BSP
Islamic banking offers alternative financial products outside of traditional financial institutions, so it is not just available to Muslims, according to a senior central bank official.
Bangko Sentral ng Pilipinas (BSP) Assistant Governor Arifa Ala said during Tuesday’s Laging Handa briefing that the government is employing a whole-of-government approach to provide a level playing field for both conventional and Islamic banking systems.
By developing an Islamic banking system, she stated, “we will be giving the Filipino people other financial solutions that can satisfy their requirements, whether they are Muslims or not.”
The Shari’ah principle, which states that the financial institution and the account holders share risks and profits, is the foundation of the Islamic banking system.
In contrast to traditional banks, where a debtor-creditor relationship is established anytime a person opens a bank account, Ala explained how Islamic banking institutions build a partnership and partake in the gains and risks associated with investing that money.
She said that because the Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP), one of the first Islamic banks in Southeast Asia, was founded in 1973, Islamic banking is not a recent development in the Philippines.
She was referring to the Philippine Amanah Bank, the sole Islamic bank in the nation that was founded in accordance with Presidential Decree 264.
The AAIIBP has chapters in Mindanao areas including Cotabato, South Cotabato, Lanao del Sur, and Sulu that have sizable Filipino Muslim populations.
The bank’s operations declined as a result of the lack of acceptance and support for Islamic banking, but once Republic Act 6848, the bank’s charter, was signed in 1990, it was possible for it to have a greater authorized capital stock of PHP1 billion, consisting of 10 million common shares. The BSP also granted it a universal bank license.
From 1990 to 2007, the bank’s operations were supported by the Bureau of the Treasury, but in 2008, the Development Bank of the Philippines took over management of the bank after purchasing shares that had previously belonged to the national government, the Social Security System, and the Government Service Insurance System.
According to Ala, the BSP and the Philippine Economic Zone Authority have signed an agreement to promote Islamic banking and finance in the nation and attract more investors.
Because the Philippine financial system has been liberalized and foreign investors can now open Islamic banks here, either as branches or full-fledged Islamic banks, she added, “it is also crucial that we use other instruments and forums to promote Islamic banking even outside of our country.”
She went on to say that the charter of the bank “is very flexible” and that it “was established to allow flexibility in promoting and expanding Islamic finance in our country.”
Ala mentioned that the BSP has released a number of circulars to promote Islamic banking, including Circulars 1069 and 1070, which outline the requirements and expectations for the Shari’ah governance framework and the capital requirements for the establishment of Islamic banks and Islamic banking units, respectively.
She claimed that a joint circular issued by the BSP, the Department of Finance, and the Bangsamoro administration also constituted a Shari’ah Supervisory Board in Muslim Mindanao’s Bangsamoro Autonomous Region.
The board, according to her, has been given the responsibility of “issuing views on the Shari’ah compliance of Islamic products and services that would be supplied here in the Philippines.”
This is crucial, she continued, because we need to make sure that the goods and services provided by Islamic financial institutions comply with Shari’ah law.
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