Islamic banking renaissance: Philippines opens doors to Middle East

The Bangko Sentral ng Pilipinas (BSP) is welcoming Islamic banks from the Middle East as part of its efforts to expand the Islamic banking and finance sector.

Speaking at a recent Philippine Economic Briefing (PEB) forum in Dubai, BSP Assistant Governor Atty. Arifa A. Ala shed light on the Philippines’ adaptable approach to Islamic banking and finance.

Ala emphasized that this approach can take the form of an Islamic banking unit (IBU) or a fully-fledged Islamic bank.

Ala, who leads the charge in advocating for Islamic banking and finance and chairs the Islamic Finance Coordination Forum, was part of the government’s economic delegation for the country’s inaugural PEB event in the Middle East.

Addressing ml0k investors from the UAE during the briefing, Ala assured them that the BSP and the Philippine government are committed to creating an enabling environment where Islamic banks can offer competitive banking products and services alongside conventional or non-Muslim banks.

Highlighting the significant market potential, Ala pointed out that the Philippines is home to approximately 115 million people, with around 10 percent being Muslims residing in the Bangsamoro Autonomous Region in Muslim Mindanao (BARRM). Furthermore, about 34 percent of cities and municipalities in the Philippines remain unbanked, representing a substantial opportunity for growth

Ala also noted that since the enactment of the Islamic banking law in 2019, the BSP has witnessed a surge in inquiries from both local and foreign banks.

Reiterating the government’s commitment, Ala stressed its intention to issue inaugural sovereign Sukuk bonds, which would expand the country’s engagement with Islamic financial markets.

She highlighted that in the Philippines, the Islamic banking and finance model strictly adheres to Shari’ah governance and risk-sharing principles, providing diverse options to both Muslims and non-Muslims in terms of risk appetite and financial needs.