Imagine a financial market that’s not just robust but also deeply inclusive, tapping into new sources of capital while adhering to ethical principles. That’s the vision the Bangko Sentral ng Pilipinas (BSP) is actively pushing for, most recently through the “Stakeholders’ Forum on Domestic Sukuk Issuance” held on July 15, 2025.
Led by the Islamic Finance Coordination Forum (IFCF),1 this landmark event at the BSP Head Office wasn’t just another dry discussion. It was a clear signal: the Philippines is serious about fostering a domestic Sukuk, 2 or Islamic bond, market. The goal? To unlock greater funding access for Muslim-owned businesses and diversify the nation’s financial landscape.
A key highlight was the participation of the International Islamic Liquidity Management Corp. (IILM), 3 a global powerhouse of central banks and financial institutions dedicated to promoting Islamic finance. IILM Chief Executive Officer Mohamad Safri Sahul Hamid lent his expertise to the panel discussions, underscoring the international significance of the Philippines’ growing interest in this sector.
Discussions delved deep, covering the intricate legal and regulatory frameworks for Sukuk, drawing lessons from IILM’s extensive experience with short-term Sukuk instruments. Attendees also gained crucial insights into the Securities and Exchange Commission’s (SEC) draft guidelines for Sukuk operations in the Philippines and the Insurance Commission’s (IC) guidelines for Takaful Window Operations 4 — the Islamic alternative to conventional insurance.
From understanding Shari’ah compliance and market operations to updates on Islamic Finance accounting initiatives and the Bureau of Internal Revenue’s (BIR) Sukuk memorandum circular, the forum left no stone unturned.
The BSP’s commitment to drive U$1B Islamic finance momentum
“The BSP remains firmly committed to advancing initiatives that promote Islamic banking and finance as part of its broader financial inclusion agenda,” affirmed BSP Monetary Board Member (MBM) Rosalia V. De Leon.
Her statement comes as interest in Sukuk continues to swell, particularly after the Philippine government’s successful US$1 billion maiden issuance of Sukuk bonds in December 2023. This initial foray proved the market’s appetite, paving the way for domestic expansion.
MBM Romeo L. Bernardo echoed this sentiment, emphasizing the critical need for a united front. “A key takeaway from the forum is the need for stronger collaboration, openness to prudential innovation, and sustained commitment to building a dynamic and inclusive Islamic finance ecosystem,” MBM Bernardo stressed, laying out a clear roadmap for future progress.
Collaboration key to inclusive, diversified PH Islamic finance growth
The potential impact of a thriving Sukuk market is significant. As BSP Assistant Governor and IFCF Chairperson Arifa A. Ala eloquently puts it, “Sukuk issuances will spur the further growth of a diversified financial market in the Philippines.”
Fitch Ratings believes these initiatives will drive significant growth in the medium to long term, particularly given the government’s focus on improving financial inclusion for the country’s underbanked Muslim population, which constitutes around 6% of the total population.
An Asian Development Bank (ADB) study revealed that 70% of Filipino Muslims prefer Islamic financial services but are often compelled to utilize conventional, interest-based products due to limited access to Shari’ah-compliant options. This highlights a significant untapped market potential for Islamic banks.
Despite this potential, the Philippines faces challenges such as low awareness and understanding of Islamic banking principles among the general population. Additionally, limited banking infrastructure in Muslim-majority regions poses an obstacle to wider adoption.
However, the government is actively addressing these challenges through various initiatives. Regulatory reforms, such as tax neutrality for Islamic banks and the easing of capital requirements, are expected to create a more level playing field for the sector and encourage further growth.
Over 100 participants from key government bodies like the BSP, BIR, IC, and SEC, alongside international players like IILMC and Islamic Finance Advisory and Assurance Services, 5 converged at the forum. Their presence underscores the collective will to see this nascent market flourish.
Ultimately, an active Sukuk market offers a powerful, Shari’ah-compliant avenue for fundraising. It’s a strategic move that enhances financial inclusion and adds a vibrant, ethically-driven layer to the Philippines’ ever-evolving financial landscape.
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[1] The BSP-led IFCF is the formalized platform of the then Interagency Working Group on Islamic Banking and Finance mandated to jumpstart collaboration among the stakeholders in finalizing the draft bill that was enacted into the Islamic Banking Law in 2019. Members are the BSP, Asian Development Bank, Auditing and Assurance Standards Council, Bangsamoro Government, BIR, Bureau of the Treasury, Department of Trade and Industry, IC, National Commission on Muslim Filipinos, Philippine Deposit Insurance Corporation, Philippine Financial and Sustainability Reporting Standards Council, and SEC.
[2] Refers to certificates that represent a proportional undivided ownership right in tangible assets, or pool of tangible assets and other types of assets. These assets could be in specific project or specific investment activity that is Shari’ah-compliant.
[3] A unique global institution that enhances cross-border investment flows, international linkages, and financial stability by creating liquid Shari’ah-compliant financial instruments for institutions offering Islamic financial services.
[4] Takaful (Islamic Alternative to Conventional Insurance) refers to a mutual guarantee for the commitment to donate a specified contribution to the participants’ risk fund whereby a group of participants agree to support one another for losses arising from risks.
[5] An international advisory firm specialised in Islamic finance, offering professional consultancy services to governments, multilateral organisations, Islamic financial institutions, and more. (https://ifaas.com/)
