Islamic banking rules to be released this yr

MANILA, Philippines - Guidelines on Islamic banking may be released by the central bank as early as this year, a Bangko Sentral ng Pilipinas official said yesterday.

“We’re trying to fast track it. It’s hard to commit to a date... (but) definitely within the (BSP) Governor’s term. Much sooner than that,” central bank Deputy Governor Nestor Espenilla told reporters yesterday.

“The initiative is something that’s a priority so we want to be supportive of that process,” he added.

BSP Governor Amando M. Tetangco Jr., whose term ends on July 2, 2017, last week said the central bank is already drafting a general law for the establishment and regulation of Islamic banks in the country.

Islamic finance is based on the Shariah or Islamic Law and one of the main differences of Islamic banking from conventional one is doing away with interest or fees for loans.

Espenilla explained that the central bank is continuously validating “assumptions” contained in the draft in order to take into account markets’ expectations.

“You need a financial product that’s credible and that’s responsive to the target markets. To be able to achieve this, you need to reach out to the grassroots because it’s important for them,” Espenilla said.

“Principles that need to be embedded in this and the sensitivity to the religious requirements need to be factored in... There are prohibited activities that are contrary to religion. Those need to be factored in,” he continued.

The BSP is working on a draft regulation for Islamic banks as the law only allows for one, specifically the Al-Amanah Islamic Investment Bank of the Philippines, to operate in the country.

The central bank believes creating a responsive Islamic banking system will also help support economic development in the country especially in Mindanao.

“Islamic banking is not just for Muslims. There’s something for non-Muslims who may like the value proposition of Islamic banking products,” Espenilla said.