• BSP urges passage of Islamic banking bill

    1

    The central bank is pushing for legislation of an Islamic banking system that would promote financial inclusion and trigger inflows of foreign investments for Muslims all over the Philippines, the Bangko Sentral ng Pilipinas (BSP) said.

    In a speech during the recently concluded Summit on Bangsamoro Economic Development, BSP Deputy Governor Diwa Guinigundo said the country’s monetary authority has collaborated with partners in both Houses of Congress to institute a legal framework for the conduct of Islamic banking in the country.

    “If Congress will enact the Islamic banking bill, the development of Islamic banking and finance can promote financial inclusion, especially for our Muslim brothers. It may also trigger inflows of foreign investments which can, in turn, be deployed to building key infrastructures,” Guinigundo said.

    “Currently, there is only one Islamic bank in the country, the Al Amanah Islamic Investment Bank, which was established in 1973. However, the progress of Islamic banking has been hampered by the lack of a legal framework,” he said.

    Guinigundo pointed out that the existing tax laws and regulations have created disparities that subject Islamic financial products to more taxes, making them less competitive in the market.

    He added that the absence of a legal framework for Islamic banking is also reflected in the absence of economic infrastructure, such as a lender of last resort, a deposit insurance system and secondary markets for such purposes.

    Such legal deficiency has also spawned a lack of experts in Islamic banking and finance, which leads to a lack of investor awareness and, consequently, provides for low acceptance of Islamic banking in the country.

    Given this, and pending legislation in Congress, the bill is supported by the central bank, which said it aims to level the playing field between Islamic and regular commercial banks.

    “We call on Congress to enact legislation that will amend the Charter of the Al Amanah Islamic Investment Bank and, more importantly, to institute a legal framework for Islamic banking,” the deputy governor said.

    The framework is expected to provide for the organization and regulation of an Islamic banking system in the Philippines, create Shari’ah advisory councils, grant tax neutrality and put in place financial facilities for Islamic banks, as well as a consumer protection and capacity building program.

    Additionally, Guinigundo also pointed out that a separate legal infrastructure being supported by the BSP in the Philippine Development Plan will provide an enabling environment that accommodates and facilitates the development of the sukuk industry, a clear and efficient system that preserves the enforceability of Islamic financial contracts; and a credible and reliable forum for settlement of legal disputes arising from Islamic finance transactions.

    The central bank will now study how to extend the benefits of its credit surety fund (CSF) scheme to Muslims by making it Shari’ah-compliant.

    “In this manner, the Islamic community will have access to funds even if facing collateral constraints,” Guinigundo said.

    CSF is a credit enhancement scheme developed by the BSP to improve the bankability and creditworthiness of micro, small and medium enterprises (MSMEs), including cooperatives, which otherwise cannot obtain financing from banks due to lack of acceptable collaterals, credit knowledge and credit track records.

    It is a fund generated by pooling the contributions of cooperatives or non-government organizations, local governments, partner institutions that serve as security for loan of MSMEs from banks in lieu of traditional collaterals.

    Share.
    loading...
    Loading...

    Please follow our commenting guidelines.

    1 Comment

    1. With the notorious incompetence corruption and CYA culture in the banking system, and being a conduit of white collar criminals and drug money laundering, BSP is now going to establish a conduit for terrorist fund movement?

      Hopeless government institutions!