Philippines revitalises Islamic banking to boost financial inclusion

Philippines has enacted a new law to provide for the regulation and organization of Islamic banks. Signed by President Duterte , the law mandates the central Bank, Bangko Sentral ng Pilipinas (BSP) to regulate and supervise the operations of Islamic banks as well as issue the implementing rules and regulations on Islamic banking.

Islamic law among other things, forbids the charging of interest, locking out many Muslims from fully participating in banking. Islamic banks provide a range of financial activities that comply with Islamic or Shari’ah Law. The new law will therefore accord Muslim Filipinos expanded access to financial services.

BSP has appointed an interagency working group to draft regulations on Islamic banking and finance. The Bureau of Internal Revenue has already drafted regulations incorporating the tax neutrality provision under the new law.