Malaysia, home to the one of the world’s largest Muslim populations, has expressed interest in helping develop the Islamic banking industry in the Philippines, the Department of Finance said Sunday.
Finance Undersecretary Jose Emmanuel Reverente said the Bangko Sentral ng Pilipinas has been holding talks with Bank Negara, Malaysia’s central bank, regarding the creation of a framework for Islamic banking in the country.
“There has been strong interest from Malaysia in terms of assisting us develop a strong Islamic banking framework… We are working closely with them,” he said.
In a forum held last March, BSP Governor Amando Tetangco Jr. lamented the scarcity of Islamic banks in the Philippines, particularly in the Autonomous Region in Muslim Mindanao (ARMM), despite the vast business opportunities available in the region.
At present, only 20 banks operate across five provinces in ARMM, with Al-Amanah bank being the only Islamic financial institution. The bank is a subsidiary of the Development Bank of the Philippines.
Malaysia, meanwhile, has 16 Islamic banks.
Reverente said the growth of Islamic banking industry in the Philippines has been stunted by the absence of a framework to guide the creation of laws that recognize the particular manner by which Muslims transact and do business.
Under traditional Islamic banking, loans to clients or customers must not carry interests. Because of this condition, Islamic banks in the Philippines serve more as an equity partner than a deposit-taking and lending institution, Reverente said.
This, in turn, puts the banks at a disadvantage when it comes to fulfilling tax obligations, he said.
The government earlier said it hopes to develop a market for the Islamic banking industry in preparation for the ASEAN economic integration in 2015.