Press Release
May 22, 2019

Adopting House Bill No. 8281 under Committee Report No. 673


May 22, 2019 at 3 o'clock in the afternoon Session Hall, Senate of the Philippines

Delivered by HON. WIN GATCHALIAN, Senator of the Republic:

Mr. President, honorable colleagues in the Senate, good afternoon. I filed the Senate counterpart bill expanding the Islamic banking system in the Philippines and providing for its regulation and organization in order to address the fundamental regulatory and institutional weaknesses for Islamic finance in the country.

"Islamic finance" commonly refers to financial activities conforming to Islamic Law or the Shari'ah. One of its main principles is the prohibition of the payment and the receipt of riba or interest in a financial transaction. It is rooted in Islamic law which does not recognize money and money instruments as a commodity, but merely as a medium of exchange. Hence, in Islamic finance, any return on financing must always be tied to an asset, or participation and risk-taking in a joint enterprise.

Mr. President, this proposed measure sets to establish the legal and regulatory framework that will make Islamic finance in the country more viable and mainstream. Industry and technical concerns will be addressed by the salient provisions of the bill, such as (1) opening the market by the creation of more Islamic banks; (2) mandating the Bangko Sentral to formulate regulations to allow for the development of Islamic banking in the country; and, (3) creating the Shari'ah Advisory Councils to ensure compliance with Shari'ah banking regulations.

This bill also presents an opportunity to tap international financial markets for both resource mobilization and investment diversification through Sukuk and equity markets. The Islamic finance industry has expanded rapidly over the past decade, growing at 10-12% annually. In many Muslim majority countries, Islamic banking assets have been growing faster than conventional banking assets. There has also been a surge of interest in Islamic finance from non-Muslim countries such as the UK, Luxembourg, South Africa, and Hong Kong.

Finally, Mr. President, 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. It will provide the framework to sufficiently and effectively guide the Bangsamoro Autonomous Region in Muslim Mindanao in achieving genuine fiscal autonomy through improvement of capital acquisition and development of the Shari'ah-based financial and banking system. It will give new regulatory and legal strength to the Islamic banking industry in the Philippines.

My honourable colleagues, I hope for your utmost support in assisting our countrymen to secure more capital and other financial opportunities, especially in Mindanao. Thank you, Mr. President.

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