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

. the bsp ’ s policy measures complement the government ’ s expansionary fiscal policy stance to boost demand and limit the adverse effects of the covid - 19 pandemic. the government ’ s accommodative fiscal policy aims to fund priority expenditures to help rebuild the economy as well as invest in social services and infrastructure. similarly, the recent approval of the 4. 5 - trillion peso general appropriations act for 2021, which prioritizes health - related response programs and infrastructure projects, could help facilitate the strong rebound of the economy and its transition to the “ new normal. ” in addition, let me stress that the bsp recognizes micro, small and medium enterprises as a vital component of the philippine economy. in fact, the bsp has approved a number of measures to assist msmes during this crisis as well as hasten their recovery and ensure sustainability of operations in the post - crisis period. these measures include allowing banks to report msme loans as part of their compliance with the bsp ’ s reserve requirement. the bsp also implemented amendments to the regulatory capital treatment of exposures to msmes, which would free up capital and enable bsp ’ s supervised financial institutions to extend more credit to the msme sector. in particular, the bsp approved a temporary reduction in the credit risk weights of loans granted to msmes that are current in status, and the assignment of lower risk weight for msme exposures that are covered by government guarantees. overall, these measures are expected to channel liquidity to the msme sector while ensuring the health and safety of the financial system. the bsp — as overseer of the payments system — likewise endeavors to provide an enabling environment for a safe, reliable, affordable, interoperable, and efficient retail payments system in the country. in fact, even before the pandemic, we had advocated for the shift to a more cash - lite economy through increased use of digital payment platforms under the national retail payment system framework or nrps. this has proven to be very useful, with physical distancing becoming the norm during this pandemic. in fact, a welcome development brought about by the new norm is the spike in pesonet and instapay transactions, the two automated clearing houses ( achs ) formed under national retail 4 / 5 bis central bankers'speeches payment system framework. in addition, the bsp ’ s issuance of the national qr code standard or qr ph has helped address