The lack of effective access to responsive financing is one of the main challenges to the growth and development of micro, small and medium enterprises (MSMEs) in the Philippines. This obstacle is doubly experienced by our Filipino Muslim entrepreneurs in the ARMM/Bangsamoro region and in different parts of the country with the absence of banking and financial services that are compliant with the principles of Shari’ah or Islamic law.

Islamic banking and finance involves the conduct of banking and finance operations consistent with the principles of Shari’ah or Islamic law. In compliance with the Shari’ah, this kind of banking and financing operations is characterized by risk-sharing and equitable distribution of wealth. Undertaking or financing of anti-social and unethical businesses, and the setting of interest or a fixed pre-determined rate of return are prohibited.

Islamic banking and finance in the Philippines is limited by three major challenges:

1) Lack of a clear and regulatory framework for Islamic banking and finance, where our existing laws do not provide for the policy infrastructure needed to enable Islamic banks to thrive and current tax laws also subject Islamic financing products to more taxes;

2) Lack or scarcity of experts on Islamic banking and finance; and

3) Lack or very low investor awareness and acceptance of Islamic banking and finance.

According to the Banko Sentral ng Pilipinas (BSP), Islamic banking is the fastest growing component of the financial services industry worldwide. It continues to grow by 21% despite the challenging global context.

Currently, there are more than 600 Islamic financial institutions operating in more than 75 countries and almost all major multinational banks offer Islamic financial services.

However, there is only one Islamic bank in the country – the Al-Amanah Islamic Investment Bank of the Philippines, established in 1973.

Thus, it is high time to provide an environment where more of our Muslim entrepreneurs can thrive and prosper, and tap their full potential to help develop the ARMM/Bangsamoro region and the whole country as well.

The Philippine Islamic Financing Act of 2016 seeks to help in addressing these challenges and enhancing the legal and policy environment for the development of Islamic financing in the country. 

The bill amends the charter of the Al-Amanah Bank, providing for the organization and regulation of an expanded Islamic banking system in the Philippines.

It seeks to strengthen the Al-Amanah Bank to service a broader market, while promoting both the establishment of other Islamic banks and engagement in Islamic banking arrangements by conventional banks under the supervision and regulation of BSP.

The proposed measure further mandates government to provide programs for increased consumer awareness and capacity building required by the expanded Islamic banking system. 

Accompanied by other critical inclusive finance reforms and innovations, this bill seeks to ensure the development of MSMEs not only in our major urban centers but also in the poorest and hardest to reach areas.

It also seeks to ensure that every Filipino regardless of status, identity, or religion has access to critical services that enable our countrymen and women to seize economic opportunities and be part of the country’s progress.

Our diversity makes us unique. Our openness and support for each and every “kababayan” is what should distinguish us and make us succeed as Filipinos.

In view of the foregoing, immediate passage of this bill is earnestly sought.