MANILA – The Bangko Sentral ng Pilipinas (BSP) has relaxed regulations for Islamic banking units (IBUs) to encourage growth and participation in the country’s Islamic finance sector.

An IBU is a division, department, office, or branch of a conventional bank that operates according to Shari’ah principles.

“We want to encourage more players to enter and help develop the Philippine Islamic finance market. This supports our goals of inclusive growth and a more diverse financial sector,” said BSP Governor Eli M. Remolona, Jr.

Under the revised rules, IBUs are no longer subject to separate capital requirements; conventional banks will follow the capital rules applicable to their bank category. Processing fees for IBU licenses will also correspond to the bank’s category.

The amendments also institutionalize a three-year observation period from the start of Islamic banking operations, giving banks time to familiarize themselves with prudential reporting requirements. IBUs are no longer required to submit a separate liquidity report and may now integrate it with the bank-wide liquidity report.

The changes form part of BSP’s efforts to promote Islamic banking and finance in line with Republic Act No. 11439, also known as the Islamic Banking Law. The move aims to broaden access to financial products for both Muslims and non-Muslims, offering services compliant with Islamic teachings, including the prohibition of interest.