DoF eyeing sale of Islamic bonds — Go

THE DEPARTMENT of Finance (DoF) is weighing fresh issuances in the Islamic bond market after the government’s maiden sukuk sale in 2023 drew strong investor demand, as regulators move to deepen Shari’ah-compliant finance in the Philippines.

Finance Secretary Frederick D. Go said the government is looking at sukuk offerings following the success of its debut issuance, which helped diversify funding sources and attract Islamic investors.

“Building on this success, we are actively exploring future issuances in the Islamic bond market,” he said at an international Islamic finance conference in Taguig City on Feb. 2.

The Philippines raised $1 billion from 5.5-year sukuk bonds in December 2023, with the order book nearly five times oversubscribed. The strong reception allowed the government to secure favorable pricing while channeling funds to public projects.

Sukuk, often referred to as Islamic bonds, represents ownership in tangible assets or Shari’ah-compliant investment activities, rather than interest-bearing debt. This structure allows Muslim investors to participate in capital markets while adhering to Islamic principles.

Mr. Go said the government is also strengthening the broader Islamic finance ecosystem.

The Insurance Commission (IC) issued the country’s first takaful operator licenses in 2024, expanding access to Shari’ah-compliant insurance products.

Takaful is a cooperative insurance model where participants contribute to a shared fund to cover losses, avoiding interest, gambling and excessive uncertainty.

The regulator has approved six takaful products from four insurers, including a micro-takaful offering aimed at lower-income groups.

“The IC has made insurance products more affordable and accessible for the Islamic community by introducing micro takaful products,” Mr. Go said, adding that the Finance department backed a policy mandating deposit insurance coverage for Islamic deposits.

The Philippine Deposit Insurance Corp. (PDIC) last year extended deposit insurance coverage of up to P1 million per depositor per bank to Islamic banks and Islamic banking units. This puts Islamic deposits on the same footing as conventional ones.

However, Mr. Go said the PDIC is now drafting guidelines to move toward a fully Shari’ah-compliant deposit insurance framework. “Due to the unique characteristics of Islamic banking, the PDIC will be formulating guidelines for the transition,” he said.

The government has also pledged continued support through its participation in the Shari’ah Supervisory Board in the Bangsamoro region and through tax-neutral policies introduced by the Bureau of Internal Revenue to remove structural barriers to Islamic finance, be added. — Aubrey Rose A. Inosante