Deposits in Islamic banks, IBUs now covered by PDIC – BusinessWorld Online
THE PHILIPPINE Deposit Insurance Corp. (PDIC) will now cover the deposits of Islamic banks (IB) and Islamic banking units (IBUs).
The PDIC’s board in December last year approved the insurance coverage of Islamic deposits as defined under the Bangko Sentral ng Pilipinas’ (BSP) regulations in the same manner as conventional deposits.
This means that deposits in IBs and IBUs will be covered up to P1 million per depositor per bank.
“The expansion of deposit insurance to include Islamic deposits guarantees that depositors of Islamic banks have the same level of protection as those of conventional banks, thereby fostering confidence in the Islamic banking system. 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 Chief Executive Officer Roberto B. Tan said in a statement on Wednesday.
“This is something positive for the Islamic banking industry,” BSP Deputy Governor Chuchi G. Fonacier said in a Viber message.
As of end-2024, there were 12,514 Islamic deposit accounts in the banking system.
The three entities with Islamic banking operations in the country are state-owned Al Amanah Islamic Investment Bank, Maybank Philippines, which began its IBU’s operations in August last year, and CARD Bank, Inc., which opened an IBU in Cotabato City last year.
Islamic banking is based on the principles of Shari’ah Law. In Islamic banking, interest is prohibited, while in conventional banking, interest is the main source of income.
Products of Islamic banks or IBUs are usually asset-backed and involve trading or renting of assets and focus on ethical financing, risk-sharing, and socially responsible practices.
The BSP has been encouraging lenders to participate in Islamic banking after the sector was opened to new players.
In 2023, the central bank approved the modified the minimum capitalization requirement for conventional banks with an IBU to give more Filipinos access to Shari’ah-compliant banking products and services. — A.M.C. Sy
