Senator Win Gatchalian has thrown his support behind the establishment of a sound legal & regulatory framework for the development of Islamic banks in the country.

Together with outgoing Senator Chiz Escudero, Gatchalian has co-sponsored Senate Bill No. 2231, or An Act Providing For The Regulation and The Organization of Islamic Banks.

Gatchalian chairs the Senate Committee on Economic Affairs, while Escudero heads the Senate Committee on Banks, Financial Institutions, and Currencies.

The former Valenzuela City mayor and congressman said the measure will pave the way for the creation of a framework that will allow Filipino Muslim entrepreneurs, especially those involved in micro, small, and medium enterprises, to effectively access responsive banking and financial services that are compliant with the principles of Shari’ah or Islamic law. This will enable the country to tap into the growing pool of Islamic investors across the Middle East and Southeast Asia, he said.

Even more important, the proposed measure will complement the Bangsamoro Organic Law, which mandates the Bangsamoro Government to promote the development of an Islamic banking and finance system in the country, according to Gatchalian.

“This proposed measure seeks to establish the legal and regulatory framework that will make Islamic finance in the country more viable and mainstream,” Gatchalian said. “Industry and technical concerns will be addressed by the salient provisions of the bill.”

“This bill also presents an opportunity to tap international financial markets for both resource mobilization and investment diversification through Sukūk and equity markets,” he added. “The Islamic finance industry has expanded rapidly over the past decade, growing at 10-12% annually.”

Under SBN 2231, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) is tasked with authorizing the establishment of Islamic banks. It can also allow conventional banks to engage in Islamic banking arrangements through a designated Islamic banking unit within the bank, provided that the Islamic banking unit is separate from its conventional banking transactions.

The bill also mandates the BSP to formulate regulations for the development of Islamic banking in the country.

At present, the Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP), created through R.A. 6848 or the Charter of the Al-Amanah Islamic Bank of the Philippines of 1990, is the only bank in the Philippines authorized to offer Islamic banking services.

The AAIIBP has eight branches in Mindanao, namely Zamboanga, Jolo, Cagayan de Oro, Iligan, Marawi, Davao, General Santos, and Cotabato. The bank’s Executive Office is located in Makati.

To ensure compliance with Shari’ah principles, the bill mandates Islamic banks to constitute a Shari’ah Advisory Council, composed of persons qualified in Shari’ah law or who have knowledge or experience in Shari’ah law and banking, finance, law, or other related disciplines.