The Department of Finance is urging Saudi Arabia's Islamic financial firms to expand operations in 217 unbanked cities and municipalities in Mindanao.

Finance Secretary Benjamin Diokno shared with the foreign businesses that the Philippine government has created policies to open up the country to more Islamic banking players.

"This is evident in its regulations on licensing of Islamic banks and banking units, liberalized modes of entry for foreign banks, and relaxation of minimum capitalization requirements for Islamic banking units. Prudential incentives are also offered to encourage the entry of new players," he said last Thursday during the Association of Southeast Asian Nations–Gulf Cooperation Council Summit at the St. Regis Hotel in Riyadh, Saudi Arabia.

Five-year transitory period

The Bangko Sentral ng Pilipinas now allows traditional commercial banks and subsidiaries of universal banks to operate an Islamic banking unit within a transitory period of five years. To do this, they should first meet the minimum capitalization required in their respective traditional banking category.

Last year, central bank officials said they were mulling to lower the minimum capital requirement below the range of P3 billion to P20 billion for various sizes of local and foreign Islamic banking units of traditional banks.

Aleem Siddiqui Guipal, group manager at the Philippine Economic Zone Authority, said Islamic banks could tap the growing demand for business loans to Halal-based small and medium enterprises or SMEs which are seen to have a bigger market of 3 billion Muslim consumers by 2060.

Ecosystem

"We should build an ecosystem to support most especially the SMEs in the Halal industry in the Philippines. There should be mechanisms, policies in Islamic banking for SMEs to scale up their businesses," he said.

To encourage foreign Islamic banks to set up business in the Philippines, Guipal said there should be "demand for Halal products, small communities producing them, and friendly relationships of entrepreneurs with local banks."

With a wider selection of Islamic banks in the country, SMEs loans for producing of Halal products can become competitive, Fazil Irwan, chief executive officer of Penang Halal International, said.

Irwan said the country can further export Halal products in the Southeast Asian region which has 240 million Muslims.

In 2018 alone, the Philippines shipped Halal products worth $560 million. The Department of Trade and Industry reported their global market value could grow up to $3.3 trillion.