There are a number of foreign countries that have preceded Islamic countries in embracing Islamic banking over the past five decades. One such example is the Republic of the Philippine where the first Islamic bank dates to 1973. Then President, Ferdinand Marcos, issued a decree to establish the first Islamic bank with an initial capital of 100 million pesos to provide financial services to several Philippine provinces that are home to large Muslim populations. This led to the opening of branches of Islamic banks to provide banking services in accordance with Islamic principles.
The Philippine government is now considering issuing Islamic Sukuk as part of its 2025 financing strategy, indicating a continued push to expand Islamic finance in the country.
A recent survey conducted by the Asian Development Bank (ADB) found strong interest in Islamic banking products. The survey, which covered 450 individuals and 50 business leaders, found that 86% of respondents were open to using Islamic savings accounts, with many expressing strong interest in such products.
The data also shows that there is growing interest from foreign players looking to establish Islamic banking operations in the country.
According to Arifa Ala, Assistant Governor for Financial Supervision at the Bangko Sentral ng Pilipinas (BSP), sukuk that complies with Islamic law by avoiding interest-based transactions is now gaining global attention as an alternative investment vehicle in the Philippines.
While no specific amount has been set for sukuk issuance, discussions are underway for the Philippine government to tap this market in 2025, with the possibility of issuing peso-denominated bonds in addition to international offerings.
For its part, BSP is working to integrate Islamic finance into the broader banking sector, with a focus on improving financial inclusion and stimulating economic growth. Since the opening of the country’s first Islamic bank, the central bank has made great strides in fostering a supportive environment for Islamic banking.
This move comes at a time when the Philippines is achieving a remarkable economic achievement according to 2023 data, topping the Southeast Asian countries with a growth rate of 5.6%, while the government is working to raise expectations to range between 6% and 7% in the coming years. This bodes well for the Philippine economy and confirms its flexibility and ability to face global challenges.
Today, there are two Islamic banks operating at full capacity in this regard, while the country’s regulatory framework for Islamic banking allows the creation of Sharia-compliant financial products and services, attracting the attention of investors worldwide.
The growth of Islamic banking services in the Philippines will witness further developments in the presence of many Filipino workers working in a large number of Islamic and Arab countries, which helps Islamic banking institutions attract these customers and enhance their savings and deposits in these institutions.
It also contributes to improving the business of economic sectors in the Philippines, including the financial services sector, which grew by 9% in 2023, as these developments are expected to drive economic growth in the country.
The economic growth achieved in the Philippines today is due to the return of life to normal and the resumption of commercial activities on a large scale after years in which the world witnessed financial, banking, and real estate problems in addition to the Covid-19 pandemic.
This necessitated the injection of huge investments into public infrastructure in addition to enhancing the rapid prosperity of digital financial services in the world.
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