A picture shows the entrance of Fitch ratings agency on August 8, 2011 in Paris. (Photo by MIGUEL MEDINA / AFP)

MANILA, Philippines – The Philippine Islamic finance industry has the potential to further grow, Fitch Ratings said on Thursday.

“Government initiatives to develop the Islamic finance industry in the Philippines are likely to support the sector’s growth in the medium to long term,” Fitch Ratings said in a report.

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The Philippine government earlier issued Islamic finance regulations, provided incentives, and launched a tax neutrality to create an enabling environment for Islamic banking.

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Fitch Ratings said these prompted some activity in Islamic banking, such as the entry of Islamic banking units of two conventional banks, namely Maybank Philippines and CARD Bank.

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According to Fitch, the Philippines currently has a significant unbanked population particularly in the Bangsamoro Autonomous Region in Muslim Mindanao.

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Islamic banking is also estimated to have below 1 percent market share in the Philippines.

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“The high remittance inflows from overseas Filipino workers, including in the GCC (Gulf Cooperation Council), many who use Islamic bank accounts, underscore the sector’s potential,” Fitch Ratings said.

Fitch Ratings said the government’s plan to incorporate Sukuk or Islamic bonds in the financing mix next year will also help boost Islamic finance growth.

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Last year, the Philippines raised USD1 billion from selling its maiden sukuk bonds.

“The 2023 sovereign sukuk is the only sukuk issued by an entity in the Philippines to date. However, growth is anticipated in the long-term,” Fitch Ratings said.

According to Fitch, the sukuk issuance next year could encourage government and private-sector entities, including financial institutions and corporates, to explore sukuk issuance, which would help the development of the local sukuk market.

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“Islamic finance initiatives could help Philippines establish closer economic ties with GCC and ASEAN countriesqueen777, such as Indonesia and Malaysia, and attract foreign direct investment,” Fitch Ratings said.

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