The Philippines’ central bank Bangko Sentral ng Pilipinas is requesting feedback on the draft for Shariah Governance Framework and licensing of Islamic banks, according to media reports. The central bank drafted the policy framework for both shariah governance and Islamic banking licencing after the Philippines President Rodrigo Duterte signed the law to regulate Islamic banks.
The drafts are currently undergoing policy exposure for feedback and suggestions. The central bank told the local media that, “The board of directors shall be ultimately responsible and accountable for ensuring full conformity of the Islamic banks or Islamic banking unit with the Shariah principles. The board of directors needs to be fully cognizant of the risk of Shariah noncompliance and its potential implications on the reputation and business of the Islamic bank or Islamic banking unit.”
Islamic banks are expected to have a Shariah Advisory Council, in addition to stand-alone and effective compliance and internal audit functions.
The central bank has drafted measures that will enable Islamic banks to offer standard banking and Shariah compliant services, the local media reported. These services will be provided in financing and joint investment operations through mudarabah partnership, musharakah joint venture, murabahah purchasing, lease arrangements other Shariah compliant contracts and structures.
In August, a new Islamic banking law was enacted to drive financial inclusion in the country. The new law will allow Islamic banks to carry out business and undertake various investments in transactions in accordance with Shariah principles.
Islamic banking is expected to boost financial inclusion by making finance accessible to groups that avoid conventional banking facilities. The presence of a well-developed regulatory framework is expected to see good participation in Islamic financing by both local and international banks.