A lawmaker on Tuesday appealed to the Development Bank of the Philippines (DBP) to lobby before the Senate the passage of the Islamic banking and financing framework in the country, as certain parties are interested in the DBP-owned Al-Amanah Islamic Investment Bank (AIIB).
Party-list Rep. Amihilda J. Sangcopan of Anak Mindanao made the push following DBP’s pronouncement that there is no initiative in forwarding and creating the law on an Islamic banking framework in the country despite the lower chamber’s approval of a measure creating such framework. According to Sangcopan, the framework is needed as there are global Islamic financial institutions interested in the DBP-owned AIIB, but are waiting for a general framework.
In November 2018, the House of Representatives approved on third and final reading House Bill 8281 or “An Act Providing for the Regulation and Organization of Islamic Banks.” Speaker Gloria Macapagal-Arroyo said 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 country.
She said Islamic banking and finance in the Philippines is limited by three major challenges:
1) lack of a clear regulatory framework for Islamic banking and finance, where 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 BSP, Islamic banking is the fastest-growing component of financial services worldwide, and it continues to grow by 21 percent despite the challenging global context. More than 600 Islamic financial institutions operate in more than 75 countries and almost all major multinational banks offer Islamic financial services.
The bill mandates the Bangko Sentral ng Pilipinas to exercise regulatory powers and supervision over the operations of Islamic banks. The BSP shall issue the implementing rules and regulations on Islamic banking. Islamic banks may exercise the general powers of a universal bank that are consistent with the principles of Shari’ah.
The measure also provides that the Monetary Board may authorize the creation of Islamic banks and the conventional banks to engage in Islamic banking arrangements, including structures and transactions, through a designated Islamic banking unit within the bank, provided that the Islamic banking unit is separate from its conventional banking transactions.
Likewise, the Board may authorize foreign Islamic banks to establish Islamic banking operations in the Philippines under any of the modes of entry provided for under Republic Act (RA) 7721, as amended, otherwise known as “The Liberalization of Entry and Operations of Foreign Banks.”
Islamic banks shall be allowed to perform banking services, such as accepting or creating current, savings accounts and investment accounts, foreign currency deposits, and shall act as correspondent banks and institutions to handle remittances or any fund transfers, accept drafts and issue letters of credit or letters of guarantee, negotiation notes and bills of exchange, evidence of indebtedness, among others.
The capitalization requirements of an Islamic bank shall be equal to those prescribed by the BSP for a universal bank. The BSP shall take the necessary steps to have the shares of stock listed in any duly registered stock exchange. In addition, the BSP shall prescribe prudential regulations and standards of conduct to promote the sound financial position of Islamic banks and to ensure integrity, professionalism and expertise in the conduct of their business, affairs and activities.
The government shall endeavor to achieve neutral tax treatment between Islamic banking transactions and equivalent conventional banking transactions within the provisions of the National Internal Revenue code of 1997 RA 8424), as amended.
The government shall provide programs for increased consumer awareness and capacity building required by the expanded Islamic banking system.
Source Business Mirror