FOREIGN Islamic banks may soon enter the Philippines after a bill authorizing the expansion of the banking system was approved on third and final reading by the Senate.
Around 20 senators voted to approve House Bill 8281 entitled “An Act Providing for the Regulation and Organization of Islamic Banks.”
The law is under the supervision of the Bangko Sentral ng Pilipinas (BSP) and regulation by the Monetary Board (MB).
The measure, which seeks to put in place a sound legal and regulatory framework for the development of Islamic banks in the country, will likewise pave the way for the entry of foreign Islamic banks to operate in the Philippines.
This, however, does not exclude conventional banks from engaging in Islamic banking arrangements, including structures and transactions through a designated Islamic banking unit within the bank, and provided that there will be a system for segregating the transactions of the Islamic banking unit from its conventional banking transactions.
“Under this proposed measure, we will provide Islamic banking and finance a policy infrastructure that shall enable Islamic banks to organize and thereafter provide all Filipinos economic opportunity for inclusive growth,” said Sen. Francis “Chiz” Escudero, chairman of the Committee on Banks, Financial Institutions and Currencies, and sponsor of the bill.
“The Philippines is seen as a top source of growth in Islamic finance and now is the most opportune time that we tap Islamic banking and finance to broaden the participation of Muslim Filipinos in nation-building,” he added.
Once enacted into law, the Islamic banks may accept or create current accounts, accept savings accounts for safekeeping or custody with no participation in profit and loss except unless otherwise authorized by the account holders to be invested, accept investment accounts, and accept foreign currency deposits.
Islamic banks may also 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 provided that such financial instruments are in accordance with the principles of Shari’ah, act as collection agent insofar as payment orders, bills of exchange or other commercial documents covering Shari’ah compliant transactions, and provide Shari’ah compliant financing contracts and structures.
Islamic banks may exercise the general powers of a universal bank that are consistent with the principles of Shari’ah.
The Al-Amanah Islamic Investment Bank of the Philippines is the first and the only Islamic bank operating in the country.
Established in 1973, Amanah Bank’s operations sought to address the need to expand the banking and credit system in Mindanao.
The bank’s charter was revised in 1974 with the mandate that it shall operate “based on the Islamic Concept of Banking,” and to follow and respect the religious beliefs and practices of Muslim Filipinos.