THE GOVERNMENT could issue peso-denominated Sukuk bonds next year, a central bank official said.
“No amount yet. But in terms of timeline, Sukuk is part of their planned issuance in 2025,” Bangko Sentral ng Pilipinas (BSP) Assistant Governor Arifa A. Ala told reporters on the sidelines of the Philippines Islamic Finance Roadshow on Tuesday.
Ms. Ala added that a peso-denominated Sukuk bond issuance could be an investment opportunity for Islamic banks in the Philippines, which would support their growth.
“If there are banks with Islamic banking windows who would like to invest in government securities, [a peso-denominated Sukuk bond] can be a form of investment for them,” she said.
Asked to confirm the planned issuance, National Treasurer Sharon P. Almanza said in a Viber message: “We are still exploring this.”
BSP Governor Eli M. Remolona, Jr. said in a speech at the same event that he hopes peso-denominated Sukuk bonds could be issued by both the public and private sector.
“We’re looking forward to peso Sukuks and corporate peso Sukuks,” he said.
The government first issued Islamic debt in December 2023, raising $1 billion from the sale of 5.5-year dollar-denominated Sukuk bonds, twice the benchmark size of at least $500 million. Its profit was set at 5.045%.
Sukuk or Islamic bonds are certificates that represent a proportional undivided ownership right in tangible assets, or a pool of tangible assets. These assets could be in a specific project or investment activity that is Shari’ah-compliant.
The markup takes the place of interest, which is illegal in Islamic law. Murabaha is not an interest-bearing loan but is an acceptable form of credit sale under Islamic law. A Sukuk al-Murabaha certificate cannot be traded on the secondary market.
Unlike usual bonds, Sukuk bond issuances must adhere to Islamic principles and must be structured to prohibit elements such interest, uncertainty and investments in businesses that deal with prohibited goods or services.
A report by the Asian Development Bank (ADB) said the Philippine government is looking to incentivize private sector entities to issue Sukuk bonds to help deepen the domestic Islamic capital market.
“Further Sukuk issuances will create new investment opportunities for investors interested in Islamic finance, promote broader participation in the market, and foster economic development,” the multilateral lender said.
“The government has created the enabling environment by amending laws and regulations and providing tax neutrality provisions. These ensure a level playing field and support the long-term growth of the industry,” the ADB said. “While the Philippines Islamic finance industry is nascent, it presents a significant growth opportunity, with the government’s focus on promoting financial inclusion and a more diverse financial landscape.”
ISLAMIC BANKING WINDOWMeanwhile, Ms. Ala said two foreign financial entities that are both active in the Philippines have signified interest in applying for an Islamic banking window.
“There are a number of banks and nonbanks which signify interest, but I cannot disclose it because they have not really submitted a formal application. But there are a number of interested potential investors,” she said.
The three entities with Islamic banking operations in the country are the state-owned Al Amanah Islamic Investment Bank, Maybank Philippines, which began operations in August, and CARD Bank, Inc., which opened an Islamic banking branch in Cotabato City this year. — Aaron Michael C. Sy