BSP underscores PH's potential as investment destination for Islamic finance

This is thanks to the country's drive for financial inclusion and robust economy amongst others.

The Bangko Sentral ng Pilipinas (BSP) has emphasised the Philippines' growing potential as an investment destination for Islamic finance, underscoring its efforts to create a supportive regulatory framework for the sector’s growth.

In June 2023, the BSP issued its first Islamic banking unit (IBU) licence to a rural bank, followed by another licence granted to a commercial bank in July 2024. These IBUs were inaugurated this year, marking two new players in the Philippine Islamic banking sector.

According to a report by the Asian Development Bank, the growth of the Islamic finance sector in the Philippines is driven by several factors, including a robust economy, drive for financial inclusion, and the market from 29% unbanked Philippine cities and towns.

Other factors include the substantial financing needs of micro, small, and medium enterprises and the strong interest of Filipino businesses and retail clients in Islamic financial services.

The report also highlighted regulatory reforms aimed at creating a level playing field for Islamic and conventional banks. These include tax regulations that ensure tax neutrality for transactions across both financial systems.

Further strengthening the sector are the Islamic Finance Coordination Forum, which aligns government efforts and initiatives on Islamic finance, and the Shari'ah Supervisory Board, which oversees Shari'ah compliance in Islamic banking and financial activities.