mandated to jointly promote the development of an islamic banking and finance system in the country. this has been further strengthened with the passage of the republic act no. 11439 – an act providing for the regulation and organization of islamic banks in 2019. this law marks an important milestone in the country ’ s islamic finance journey which started in as early as 1973 with the establishment of the philippine amanah bank. even back then, the philippines has been one of the first muslim - minority countries to recognize the importance of islamic finance. the bank eventually became the al - amanah islamic investment bank which, to date, is the only islamic bank in the country. the newly enacted law aims to bring forth the full potential of what the country has started in 1973 as an early mover in islamic financing – that is to promote real socioeconomic development in muslim mindanao through islamic financing. republic act 11439 is envisioned to facilitate the development of islamic financing in the country by allowing other domestic and foreign islamic banking players, either full - fledge islamic banks or islamic banking windows, to operate. as regulator, bsp envisions a system that accommodates islamic finance within a flexible but secular unitary framework. licensing framework for islamic banks will be anchored on that for conventional banks with supplementary prudential requirements that recognize the inherent characteristics of islamic banking and finance, particularly compliance with shari ’ ah principles. to level the playing field and provide an opportunity for more players, the framework provides conventional banks to offer compliant products and services through business units or windows that take into consideration shari ’ ah parameters and compliant mechanisms particularly the separation of funds. in addition, this legal framework awards non - muslim investors the opportunity to invest and diversify their portfolios. bsp, together with the other members of the interagency technical working group on islamic banking and with the support of our development partners, will work toward ensuring that the legal framework is effectively implemented through appropriate rules and regulations. as mandated by the law, government will also endeavor to achieve neutral tax treatment between islamic banking transactions and equivalent conventional banking transactions. beyond our regulatory goal of promoting stability and level playing field, bsp is committed to support the growth of the islamic banking industry in the country. under its amended charter, bsp is empowered to institute reforms and issue enabling policies to ensure that the islamic banking industry receives appropriate liquidity and other financial support. with all these developments, i am optimistic about the future of islamic finance in the country. we now have the much awaited and

benjamin e diokno : role of islamic banking in promoting financial inclusion in the philippines speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the 4th international islamic finance conference, manila, 25 november 2019. * * * assala mualaukum! i wish to thank the national commission on muslim filipinos and the department of foreign affairs for giving the bsp this opportunity to talk about the role of islamic banking in promoting financial inclusion in the country. it is a timely and relevant topic that we are only happy to discuss in a forum like this. indeed, for a country with muslims representing 10 % of its people, our financial inclusion narrative would be incomplete without touching on islamic banking and finance. this statement becomes even more relevant when faced with the inconvenient truth that the three poorest provinces in the country are predominantly muslim, namely : lanao del sur, sulu, and basilan. financial inclusion has become widely recognized as an enabler for inclusive growth and poverty alleviation, offering a path to shared prosperity for all. this is because the ability to use wideranging, well - designed financial services enable individuals to build financial resilience and pursue economic opportunities. as the broader population become more productive participants in the economy, financial inclusion can also reinforce the country ’ s economic growth. islamic finance shares the same promise, but focusing in particular to the socioeconomic needs of the muslim population. if we are to address the needs of our underserved muslim brethren in mindanao and elsewhere in the country, we need to deliberately promote both islamic finance and financial inclusion. financial inclusion has been a strategic goal of the bsp, even long before it became an explicit mandate under its recently amended charter. under republic act no. 11211 signed in february 2019, bsp is mandated to “ promote broad and convenient access to high quality financial services and consider the interest of the general public. ” for us in the bsp, this is a strong recognition of financial inclusion as an important national development goal. as you may be aware, account penetration — the basic indicator of inclusion — stood at a low 22. 6 % based on our 2017 financial inclusion survey. meanwhile, 40 % of adults with loans reported borrowing from informal sources. right now, financial inclusion in the country may be at a dismal state. but the bsp is optimistic that significant improvement will be seen in