The Bangko Sentral ng Pilipinas (BSP) has eased regulations for Islamic banking units (IBUs) to encourage more participation in the country’s growing Islamic finance industry.
An IBU refers to a branch, department, or division of a conventional bank that operates in accordance with Shari’ah principles. BSP Governor Eli M. Remolona, Jr. said the reforms aim to make the system more inclusive and attractive to both local and foreign banks.
“We want to encourage more players to enter and help develop the Philippine Islamic finance market. This supports our goals of inclusive growth and a more diverse financial sector,” said Remolona.
Under the amended rules, IBUs will no longer be subject to a separate capital requirement. Instead, the parent bank’s existing capital framework will apply, along with its corresponding processing fees for IBU license applications.
The BSP has also institutionalized a three-year observation period for new IBUs to submit prudential reports. This adjustment allows sufficient time for banks to familiarize themselves with Islamic finance reporting standards.
Furthermore, IBUs are no longer required to submit a standalone liquidity report. They may now integrate Islamic banking data into their overall bank-wide liquidity reports to reduce administrative burden.
These regulatory adjustments are part of BSP’s ongoing effort to strengthen Islamic banking in the country under Republic Act No. 11439, or the Islamic Banking Law. The move aligns with the central bank’s broader push for inclusive finance, allowing Muslims access to banking services that adhere to Islamic principles—such as the prohibition of interest—while providing non-Muslims with alternative financial products.
Through these reforms, the BSP aims to position the Philippines as a competitive hub for Islamic finance in Southeast Asia, fostering financial inclusion and economic diversity across communities.