As part of financial reforms, Bangko Sentral ng Pilipinas plans to develop a broader Islamic banking system as the Philippine economy is now more global in nature, a central bank official told reporters over the weekend.

The structure of the credit facility would be in line with principles of Islamic finance, said Deputy Governor Nestor Espenilla Jr. “The typical difference is that Islamic finance doesn’t have interest because interest is prohibited…

“They have products that don’t require interest so we have to consider that… That is why we are carefully positioning the key generic approach,” he added.

“So that is why  Espenilla said.

The planned Islamic banking system would be broader than the Al-Amanah Islamic Bank, which is the first and only Islamic bank in the Philippines today.

“The Al-Amanah is small-scale… it’s not very active,” he said, citing the need to develop a larger system. “So we’re just preparing for that,” the central banker noted.

Established by then-President Ferdinand Marcos as the Philippine Amanah Bank in 1973, and capitalized at P100 million, the Al-Amanah Islamic Bank charter covered the provinces of Basilan, Cotabato, Lanao del Norte, Lanao del Sur, Palawan, Sulu, Tawi-Tawi, and Zamboangas del Norte and Sur – or places with large Muslim populations.

The charter was amended in 1974 to expand operations in Maguindanao and Sultan Kudarat and in 1989 the bank was re-chartered and re-capitalized under Republic Act 6848 and renamed as the Al-Amanah Islamic Investment Bank of the Philippines with a P1-billion capital.

The bank was sold to state-owned Development Bank of the Philippines in 2008.

Foreign Islamic banks may be allowed to tap into the planned Islamic banking system, Espenilla said.

The underlying vision is to help the government achieve a lasting peace in Mindanao, said Deputy Governor Vic Aquino.

The reform is part of amendments to the Bangko Sentral Charter submitted to Congress in the form of a bill amending the 20-year old charter. – VS, GMA News