Philippines in major Islamic finance push
Manila, September 28, 2013
In what could be one of the most ambitious efforts to facilitate Islamic finance in a non-Muslim country, the Philippines' central bank is pushing several initiatives to develop the sector and encourage financial inclusion of the Muslim minority.
The effort follows a landmark peace deal signed in October last year which sought to end a 40-year conflict with Muslim separatists that has killed 120,000 people, displaced two million and stunted growth.
"There is renewed interest in this and the key drivers are the peace initiative in Mindanao as well as broad initiative of the BSP to create a more inclusive financial system," Bangko Sentral ng Pilipinas (BSP) deputy governor Nestor Espenilla said. "That is the arching principle."
Mindanao island, roughly the size of Portugal, accounts for around one-quarter of the country's 97m population and one-fifth of its economy. But decades of neglect, corruption and violence have impoverished parts of the island, despite being rich in natural resources which the government wants to develop.
"We have a significant Muslim population and they are economically active and if you want to create an inclusive financial system then you should also have financial products that are geared to that particular customer base."
Espenilla said the central bank has asked congress to have its charter amended, a move that would allow it to provide Sharia-compliant instruments to Islamic banks, in particular interbank lending products.
The BSP hopes an Islamic banking law can also help attract more market participants as there is only one Islamic bank, Al Amanah, which has struggled financially and is being privatised by the Development Bank of the Philippines (DBP).
"Even if DBP is successful in privatising it, it will just result in one Islamic bank in the country. If you want to fully enable an Islamic banking system, as opposed to one Islamic bank, we may have to come up with an Islamic banking law."-Reuters