The future of Islamic finance in the Philippines lies in the central bank’s “open approach” system and the government’s move to harmonize regulations to encourage the establishment of Islamic banks in the country.
“The UK has long encouraged an open approach to Islamic banking within its own regulatory borders,” said economic advisor Aaron Francis Chan of the British Embassy in Manila.
Chan said the Financial Services Authority and the British government have “worked consistently” for a harmonized regulation and ensure a fair market for Islamic banking services in Britain, and has been encouraged by the Bangko Sentral ng Pilipinas’ (BSP) move to do a similar approach such as in allowing non-Islamic banks or conventional banks to offer Islamic finance. He cited as example British banks Standard Chartered Bank and HSBC which have their own Islamic banking units. Today, there are 20 British banks offering Islamic finance.
With the Philippines plans of issuing Sukuk bonds in the future, Chan said that again, the UK success in launching its first sovereign Sukuk bonds is an example that non-Muslim states can successfully raise funding from Islamic bonds.
“The UK just raised about £200 million pounds ($336 million) through its first sovereign Sukuk- the first from any Western government. It was a landmark event that also took time to come to fruition, but the UK experience shows that the regulatory and legal complexity can be successfully managed by non-Muslim majority countries like the Philippines,” Chan commented. The UK issued the Sharia (Law of Islam)-compliant Sukuk bonds in October 2013.
In a briefing with reporters last week, Chan said the UK can assist the government and the BSP in crafting banking reforms that would allow the expansion of Islamic finance in the country.
The recent signing into law of the foreign bank liberalization could also potentially help nurture Islamic finance in the country as this would make it possible for Islamic financial institutions, including British banks, to set up shop locally.
The UK’s Islamic finance industry has been growing for the last 30 years with assets of $19 billion. Globally, Islamic finance is estimated to have an investment of $2.2 trillion by the end of 2014.
The BSP is promoting an open approach system to Islamic finance. This would allow conventional or non-Islamic banks to offer Islamic finance.
BSP Governor Amando M. Tetangco Jr. said earlier that this approach will complement efforts to build and establish more Islamic banks in the country.
The BSP is already working on acceptable legal framework for Islamic banking and is drafting a general law for the creation and regulation of Islamic banks. To begin with, there are proposed changes to the BSP charter to adopt regulations for the extension of financial facilities to Islamic banks.
Tetangco said it is encouraging that the central bank, an associate member of the Malaysia-based Islamic Financial Services Board, has received some support from other international organizations for their initiatives.
Based on the proposed amendments to the New Central Bank Act of 1993 (Republic Act No. 7653), the BSP wants to provide credit and liquidity facilities to Islamic financial institutions. This will allow the entry of more Islamic banks into the country.
source: Manilla Bulletin