Fitch forecasts growth in Philippine Islamic finance sector

The government plans to incorporate sukuk in its 2025 financing mix. 

The Philippine government's initiatives to develop Islamic finance are expected to drive sector growth in the medium to long term, Fitch Ratings says. 

After issuing its first sukuk in 2023, raising $1b, the government plans to incorporate sukuk in its 2025 financing mix. 

The government also aims to improve financial inclusion for the country’s underbanked Muslim population, which represents 6% of the population.

Despite progress, challenges remain, including low awareness and understanding of Islamic banking. 

An Asian Development Bank (ADB) study found that 70% of Muslims prefer Islamic financial services but are forced to use interest-based products. 

The Philippines also faces limited banking infrastructure in Muslim-majority regions. However, regulatory reforms, such as tax neutrality for Islamic banks and the easing of capital requirements, are expected to support future growth in the sector.