Philippine Deposit Insurance Corp. (PDIC). INQUIRER FILE PHOTO
MANILA, Philippines — Money kept by Islamic banks and Islamic banking units is now protected by the Philippine deposit insurance system, helping inspire confidence in the local Islamic banking sector.
In a statement on Wednesday, the Philippine Deposit Insurance Corp. (PDIC) said the expansion of deposit insurance to include Islamic deposits would give clients of Islamic banks the same level of protection that depositors of conventional banks enjoy.
Recall that the PDIC, which is mandated to safeguard money kept in bank accounts, had implemented a new maximum deposit insurance coverage of P1 million per depositor. This was double the previous coverage of P500,000.
Islamic banking, as defined in Republic Act 11439, refers to a banking business with objectives and operations that do not involve interest, which is prohibited by the Islamic or Shari’ah Law.
As of 2024, data showed there were 12,514 Islamic deposit accounts in the banking system.
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Financial inclusion
“This is a welcome development that also aligns with the National Government’s pursuit of promoting financial inclusion and strengthening of the Islamic banking sector in the country as this encourages more individuals and businesses to save in banks,” PDIC president and CEO Roberto Tan said.
Since the creation of a legal framework for Islamic banks, regulators have been working hard to develop a vibrant Islamic banking ecosystem in the Philippines. The Muslim population accounts for about 10 percent of Filipinos.
Central bank data showed that 29 percent of the cities and municipalities in the Philippines remain unbanked, with the Bangsamoro Autonomous Region in Muslim Mindanao being the most unbanked region.
Islamic banking and finance can promote inclusive finance by making it available to groups that avoid using existing conventional banking facilities due to their faith.
READ: Regulatory push seen attracting interest in Philippine Islamic banking
It can also be attractive to non-Muslims, particularly investors within or outside the Philippines who may be looking for new asset classes, instruments and products to diversify their portfolios.