• 3D Legal Solutions

Islamic bank regulation in the Philippines

Updated: Jul 6, 2020

President Duterte signed into law Republic Act (RA) 11439, entitled “An Act Providing for the Regulation and Organization of Islamic Banks” on August 22, 2019.



This law addresses the need of a significant portion of the Philippine population - those who cannot open a bank account because of religious concerns. Implementing this law will provide greater opportunities to an underserved Muslim population, and can help fund small and medium-sized enterprises owned by them.


Islamic banking is based on the principles of Islamic or Shari’ah principles. Two important principles of Islamic banking are the sharing of profit and loss, and the prohibits collection of interest and speculation. Instead of interest, Islamic banks make a profit through equity participation.


The banks perform their business by offering savings and current accounts to depositors which are repayable upon demand. They may offer investment accounts for a fixed time period under an agreement to share the profits and losses on the investment of such funds. The banks may also enter into banking businesses with objectives and operations that do not involve interest or riba.


Under the law, the Monetary Board may authorize the establishment of Islamic Banks. It may also authorize conventional banks to engage in Islamic banking arrangements, for as long as the bank has a system of segregating the transactions of the Islamic banking unit from its conventional banking business. It may also allow foreign Islamic banks to establish banking operations in the Philippines.


The Bangko Sentral shall exercise regulatory powers and supervision over the operations of Islamic Banks and shall issue the implementing rules and regulations on Islamic banking.

The Islamic bank shall comply with Shari'ah principles and shall constitute a Shari'ah advisory council to render advice, but which will not involve itself with the operations of the Islamic bank.


The capitalization requirement of an Islamic bank shall be equal to that prescribed for a universal bank, and it may take steps to have their shares of stock registered in a stock exchange.


The government shall do its best to achieve neutral tax treatment between Islamic banking transactions and conventional banking transactions. The BIR circularized RA No. 11439 in Revenue Memorandum Circular No. 67-2020, issued on July 2, 2020.


To achieve the international and domestic objectives of Islamic banking, it has been excluded from application of certain laws, specifically, the General Banking Law of 2000, Presidential Decree No. 1445 (Government Auditing Code of the Philippines), Republic Act No. 3591 (PDIC Charter) and all laws regulating insurance companies. Instead, policies appropriate to Islamic banking practices shall be established.