The Philippine chapter of Getting the Deal Through: Islamic Finance & Markets 2016 was contributed by SyCipLaw Managing Partner Rafael A. Morales with Amer Hussein N. Mambuay. The chapter includes information on policies, legislation and supervision covering Islamic finance in the Philippines, contracting concepts, products, and updates and trends.

Overview
1 In general terms, what policy has your jurisdiction adopted towards Islamic finance? Are Islamic finance products regulated differently from conventional instruments?
The Philippines officially recognised Islamic finance 40 years ago when a legislative charter was granted to Al Amanah Bank, the first Islamic bank in the country established to cater to the banking requirements of the Muslim population. That bank was eventually reorganised and phased out in 1990 with the establishment of Al-Amanah Islamic Investment Bank of the Philippines. However, since then no significant steps have been taken by the Philippine government to encourage Islamic banking and finance in the country. In general terms, therefore, the Philippines has relinquished its leadership in this field and and has watched its neighbours in the region surpass it.

However, there is no prohibition against the entry of shariahcompliant investments. Further, foreign banks with Islamic windows in Muslim countries, as well as a foreign Islamic bank, have been operating in the Philippines, although their current activities are confined to conventional banking.

2 How well established is Islamic finance in your jurisdiction?
Are Islamic windows permitted in your jurisdiction? The General Banking Law of 2000 recognises ‘Islamic banks’ as a category of banking institutions, but the Bangko Sentral ng Pilipinas (BSP), the regulator of the banking industry, has yet to issue a circular allowing local banks (including local branches of foreign banks) to establish Islamic windows, even if this measure is within the broader power of the BSP to make ‘other classifications of banks’ as it may deem appropriate. To date, no conventional banks have introduced Islamic windows.

Therefore, there are no Islamic investment products offered by any of the banks and financial institutions in the Philippines, aside from the Al-Amanah Islamic Investment Bank. There was a plan of the Philippine government to offer sukuk to finance Islamic pilgrimages but that plan has never been implemented.

3 What is the main legislation relevant to Islamic banking, capital markets and insurance?
The Congress of the Philippines has yet to enact a general framework for Islamic banking, capital markets and insurance in the country, apart from the legislative charter of Al-Amanah Islamic Investment Bank. In the absence of this law, the existing laws applicable to conventional banking, capital markets and insurance would have to be considered. Fortunately, article 1306 of the Civil Code of the Philippines allows contracting parties to ‘establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy’. This autonomy in contract-making would allow the adoption of terms and conditions acceptable or suitable to Islamic banking, capital markets and insurance, with the approval of the BSP for banking, the Securities and Exchange Commission (SEC) for capital markets, and the Insurance Commission (IC) for insurance.