Difference between revisions of "Islamic Finance in the Philippines"

Latest revision as of 19:30, 9 February 2023

Islamic finance in the Philippines is traceable to 1973 with the establishment of the Al-Amanah Islamic Investment Bank (abbreviated as "AAIIB"), pursuant to Presidential Decree No. 264. In 2019, Republic Act No. 11439 or the “Islamic Banking Act” was signed into law, paving the way for the establishment of Islamic banks (IBs) and separate Islamic banking units (IBUs) within conventional banks in the Philippines.

Laws and Regulations on Islamic Finance

AAIIB Charter

Creation of the Bank

The AAlIB, then having the corporate name "Al-Amanah Islamic Bank," was created in 1973 by virtue of Presidential Decree No. 264.

Amendment of the Bank Charter

The bank's charter was subsequently amended the following year in 1974 by virtue of Presidential Decree No. 542.

Re-Chartering of the Bank

AAIIB was re-chartered in 1989 by virtue of Republic Act No. 6848, providing the legal framework for its operation as an investment bank.

The Islamic Banking Act

To ensure conformity with Shari'ah principles, the law requires IBs/IBUs to establish a Shari'ah Advisory Council. To promote a level playing field for lslamic banking, the law requires tax neutrality with their substantially equivalent conventional transactions. The Islamic Banking Act also mandates consumer education and capacity building.

Implementation of the Islamic Banking Act

Bangko Sentral ng Pilipinas

The Bangko Sentral ng Pilipinas (abbreviated as "BSP") has issued various implementing circulars such as the Guidelines on the Establishment of IBs and IBUs; Shari'ah Governance Framework; Guidelines for Reporting Islamic Banking and Finance Transactions/Arrangements; and the Management of Liquidity Risk by IBs and IBUs. The BSP has entered into a Memorandum of Agreement with the Accounting and Auditing Organization for Islamic Financial Institutions (AOOIFI) to cover the possible adoption of relevant AAOIFI standards by the local Islamic banking and finance industry, and cooperation in the areas of capacity building and technical assistance. The BSP has also issued a memorandum to address Frequently Asked Questions on Islamic Banking in the Philippines.

Bureau of Internal Revenue

The Bureau of Internal Revenue has issued Revenue Regulations No. 17-2020 and Revenue Memorandum Circular No. 35-2022 to implement the tax neutrality provision in the Islamic Banking Act.

The Bangsamoro Organic Law

Republic Act No. 11054 or the “Bangsamoro Organic Law” established the Bangsamoro Autonomous Region in Muslim Mindanao (abbreviated as "BARMM") . The law also has provisions on the promotion and development of Islamic banking and finance.

Implementation of the Bangsamoro Organic Law Provisions on Islamic Finance

Creation of a Shari'ah Supervisory Board

The Shari’ah Supervisory Board in the BARMM was established by virtue of a joint circular issued by the BSP, the Department of Finance (abbreviated as the "DOF"), the National Commission on Muslim Filipinos (abbreviated as the "NCMF"), and the Bangsamoro Government.

Islamic Finance Roadmap

The Bangsamoro Government is currently finalizing a roadmap for Islamic finance in the BARMM and the Philippines in general.

Tax Neutrality for Islamic Finance in the BARMM

The Bangsamoro Government is working on tax neutrality between Islamic finance transactions and their conventional counterparts in the development of the Bangsamoro revenue code.

Other Government Issuances on Islamic Finance

Insurance Commission

The Insurance Commission issued Circular Letter No. 2022-04 on the Baseline Regulatory Framework for Takaful Undertakings in 2022.

Department of Justice

The Department of Justice rendered Opinion No. 36, s. 2022, which opined that the Republic of the Philippines, through the DOF, can validly execute under existing laws a Shari'ah-compliant financing instrument called Sukuk, which will be issued following a structure denominated as a Commodity Murabarah via a Tawarruq Arrangement.

@@ Line 1: / Line 1: @@
-[[Islamic finance]] in the Philippines can be traced to 1973 with the establishment of the [[Al-Amanah Islamic Investment Bank]] (abbreviated as "AAIIB"), pursuant to [[Presidential Decree No. 264]]. In 2019, [[Republic Act No. 11439 or the “Islamic Banking Act”]] was signed into [[law]], paving the way for the [[establishment of Islamic banks (IBs) and separate Islamic banking units (IBUs) within conventional banks]] in the Philippines.
+'''[[Islamic finance]]''' in the Philippines is traceable to 1973 with the establishment of the '''[[Al-Amanah Islamic Investment Bank]]''' (abbreviated as "AAIIB"), pursuant to [[Presidential Decree No. 264]]. In 2019, '''[[Republic Act No. 11439 or the “Islamic Banking Act”]]''' was signed into [[law]], paving the way for the [[establishment of Islamic banks (IBs) and separate Islamic banking units (IBUs) within conventional banks]] in the Philippines.
-=Laws and Regulations on Islamic Finance=
+==Laws and Regulations on Islamic Finance==
-==AAIIB Charter==
+===AAIIB Charter===
-===Creation of the Bank===
+====Creation of the Bank====
-The AlIB, then having the corporate name "Al-Amanah Islamic Bank," was created in 1973 by virtue of [[Presidential Decree No. 264]].
+The AAlIB, then having the corporate name "Al-Amanah Islamic Bank," was created in 1973 by virtue of [[Presidential Decree No. 264]].
-===Amendment of the Bank Charter===
+====Amendment of the Bank Charter====
 The bank's charter was subsequently amended the following year in 1974 by virtue of [[Presidential Decree No. 542]].
-===Re-Chartering of the Bank===
+====Re-Chartering of the Bank====
-AIIB was re-chartered in 1989 by virtue of [[Republic Act No. 6848]].
+AAIIB was re-chartered in 1989 by virtue of [[Republic Act No. 6848]], providing the legal framework for its operation as an '''investment bank'''.
-==The Islamic Banking Act==
+===The Islamic Banking Act===
-To ensure [[conformity with Shari'ah principles]], the law requires IBs/IBUs to establish a [[Shari'ah Advisory Council]]. To promote a level playing field for lslamic banking, the law requires [[tax neutrality]] with their [[substantially equivalent conventional transactions]]. The Islamic Banking Act also mandates [[consumer education]] and [[capacity building]].
+To ensure [[conformity with Shari'ah principles]], the law requires IBs/IBUs to establish a [[Shari'ah Advisory Council]]. To promote a level playing field for lslamic banking, the law requires '''[[tax neutrality]]''' with their [[substantially equivalent conventional transactions]]. The Islamic Banking Act also mandates [[consumer education]] and [[capacity building]].
-===Implementation of the Islamic Banking Act===
+====Implementation of the Islamic Banking Act====
-====Bangko Sentral ng Pilipinas====
+=====Bangko Sentral ng Pilipinas=====
-The [[Bangko Sentral ng Pilipinas]] has issued various [[implementing circulars]] such as the [[Guidelines on the Establishment of IBs and IBUs]]; [[Shari'ah Governance Framework]]; [[Guidelines for Reporting Islamic Banking and Finance Transactions/Arrangements]]; and the [[Management of Liquidity Risk by IBs and IBUs]]. The BSP has entered into a Memorandum of Agreement with the [[Accounting and Auditing Organization for Islamic Financial Institutions (AOOIFI)]] to cover the possible adoption of relevant [[AAOIFI standards]] by the local Islamic banking and finance industry, and cooperation in the areas of capacity building and technical assistance.
+The [[Bangko Sentral ng Pilipinas]] (abbreviated as "BSP") has issued various [[implementing circulars]] such as the '''[[Guidelines on the Establishment of IBs and IBUs]]'''; '''[[Shari'ah Governance Framework]]'''; '''[[Guidelines for Reporting Islamic Banking and Finance Transactions/Arrangements]]'''; and the '''[[Management of Liquidity Risk by IBs and IBUs]]'''. The BSP has entered into a Memorandum of Agreement with the '''[[Accounting and Auditing Organization for Islamic Financial Institutions (AOOIFI)]]''' to cover the possible adoption of relevant '''[[AAOIFI standards]]''' by the local Islamic banking and finance industry, and cooperation in the areas of capacity building and technical assistance. The BSP has also issued a memorandum to address Frequently Asked Questions on Islamic Banking in the Philippines.
-====Bureau of Internal Revenue====
+=====Bureau of Internal Revenue=====
-The [[Bureau of Internal Revenue]] has issued [[Revenue Regulations No. 17-2020]] and a [[Revenue Memorandum Circular No. 35-2022]] to implement the Tax Neutrality provision in the Islamic Banking Act.
+The [[Bureau of Internal Revenue]] has issued '''[[Revenue Regulations No. 17-2020]]''' and '''[[Revenue Memorandum Circular No. 35-2022]]''' to implement the '''[[tax neutrality]]''' provision in the Islamic Banking Act.
-==The Bangsamoro Organic Law==
+===The Bangsamoro Organic Law===
-[[Republic Act No. 11054 or the “Bangsamoro Organic Law”]] established the [[Bangsamoro Autonomous Region in Muslim Mindanao]] (abbreviated as "BARMM") . The law also has provisions on the promotion and development of Islamic banking and finance.
+'''[[Republic Act No. 11054 or the “Bangsamoro Organic Law”]]''' established the [[Bangsamoro Autonomous Region in Muslim Mindanao]] (abbreviated as "BARMM") . The law also has provisions on the promotion and development of Islamic banking and finance.
-===Implementation of the Bangsamoro Organic Law Provisions on Islamic Finance===
+====Implementation of the Bangsamoro Organic Law Provisions on Islamic Finance====
-====Creation of a Shari'ah Supervisory Board====
+=====Creation of a Shari'ah Supervisory Board=====
-The [[Shari’ah Supervisory Board in the BARMM]] was established by virtue of a [[joint circular]] issued by the BSP, the [[Department of Finance]] (abbreviated as the "DOF"), the [[National Commission on Muslim Filipinos]] (abbreviated as the "NCMF"), and the Bangsamoro Government.
+The '''[[Shari’ah Supervisory Board in the BARMM]]''' was established by virtue of a [[joint circular]] issued by the BSP, the [[Department of Finance]] (abbreviated as the "DOF"), the [[National Commission on Muslim Filipinos]] (abbreviated as the "NCMF"), and the Bangsamoro Government.
-====Islamic Finance Roadmap====
+=====Islamic Finance Roadmap=====
 The Bangsamoro Government is currently finalizing a [[roadmap for Islamic finance]] in the BARMM and the Philippines in general.
-====Tax Neutrality for Islamic Finance in the BARMM====
+=====Tax Neutrality for Islamic Finance in the BARMM=====
-The Bangsamoro Government is working on tax neutrality between Islamic finance transactions and their conventional counterparts in the development of the [[Bangsamoro revenue code]].
+The Bangsamoro Government is working on tax neutrality between Islamic finance transactions and their conventional counterparts in the development of the '''[[Bangsamoro revenue code]]'''.
-=Other Government Issuances on Islamic Finance=
+==Other Government Issuances on Islamic Finance==
-==Insurance Commission==
+===Insurance Commission===
-The [[Insurance Commission]] issued [[Circular Letter No. 2022-04]] on the Baseline Regulatory Framework for [[Takaful]] Undertakings in 2022.
+The [[Insurance Commission]] issued [[Circular Letter No. 2022-04]] on the '''Baseline Regulatory Framework for [[Takaful]] Undertakings''' in 2022.
-==Department of Justice==
+===Department of Justice===
-The [[Department of Justice]] rendered [[Opinion No. 12, s. 2022]], which opined that the Republic of the Philippines, through the DOF, can validly execute under existing laws a Shari'ah-compliant financing instrument called [[Sukuk]], which will be issued following a structure denominated as a [[Commodity Murabarah]] via a [[Tawarruq]] Arrangement.
+The [[Department of Justice]] rendered [[Opinion No. 36, s. 2022]], which opined that the Republic of the Philippines, through the DOF, can validly execute under existing laws a Shari'ah-compliant financing instrument called [[Sukuk]], which will be issued following a structure denominated as a [[Commodity Murabarah]] via a [[Tawarruq]] Arrangement.
-=List of Islamic Finance Institutions in the Philippines=
+==List of Islamic Finance Institutions in the Philippines==
-==Islamic Banks==
+===Islamic Banks===
 * [[Al-Amanah Islamic Investment Bank]]
-==List of Microfinance NGOs in the Philippines==
+===List of Microfinance NGOs in the Philippines===
 * [[ASA Philippines]]
+==List of Islamic Finance Consultancy Firms in the Philippines==
+* [[Nashrah Consultancy Inc.]]
+==External Links==
+* [http://bsp.gov.ph/ Official Website of the Bangko Sentral ng Pilipinas]
+* [https://www.bsp.gov.ph/Regulations/Banking%20Laws/RA11439.pdf Published Copy of Republic Act No. 11439 Published Copy of Republic Act No. 11439]
+* [https://www.officialgazette.gov.ph/downloads/2018/07jul/20180727-RA-11054-RRD.pdf Published Copy of Republic Act No. 11054]
+* [https://www.bsp.gov.ph/Regulations/Issuances/2019/c1069.pdf Published Copy of BSP Circular No. 1069]
+* [https://www.bsp.gov.ph/Pages/FinancialStability/Islamic%20Banking/docs/Annex%20B_Summary%20Guide%20for%20Islamic%20Bank%20License%20Applicants_v%2010%20August%202022.pdf BSP Summary Guide of Islamic Bank License Applicants]
+* [https://www.bsp.gov.ph/Regulations/Banking%20Laws/RA11439.pdf Published Copy of Republic Act No. 11439 Published Copy of Republic Act No. 11439]
+* [https://www.bsp.gov.ph/Regulations/Issuances/2019/c1070.pdf Published Copy of BSP Circular No. 1070]
+* [https://www.bsp.gov.ph/Regulations/Issuances/2022/1139.pdf Published Copy of BSP Circular No. 1139]
+* [https://www.bsp.gov.ph/Regulations/Issuances/2021/1116.pdf Published Copy of BSP Circular No. 1116]
+* [https://www.bsp.gov.ph/Regulations/Issuances/2020/m052.pdf BSP's FAQs on Republic Act No. 11439]
+* [https://bir.gov.ph/ Official Website of the Bureau of Internal Revenue]
+* [https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202020/RR%20No.%2017-2020.pdf Published Copy of Revenue Regulations No. 17-2020]
+* [https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2022%20RMCs/RMC%20No.%2035-2022.pdf Published Copy of Revenue Memorandum Circular No. 35-2022]
+* [https://nashrahconsultancy.com Official Website of Nashrah Consultancy, Inc.]
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