The plan of the national government to include Sukuk bonds in its planned issuances next year bodes well for the development of Islamic finance in the Philippines, according to Fitch Ratings Inc. In a brief, Fitch Ratings said Islamic banking and finance initiatives such as the issuance of Sukuk bonds will also boost the country’s ties with its Asean neighbors Indonesia and Malaysia and Gulf Cooperation Council (GCC) countries.
Fitch Ratings also noted that the expansion of Islamic banking in the country will also help the unbanked in the Bangsamoro Autonomous Region in Muslim Mindanao (Barmm) region, which currently has the fewest bank branches in the country. According to the American credit rating agency, the Philippine government is looking to incorporate sukuk in its 2025 financing mix, after its 2023 maiden sukuk, rated ‘BBB’, raised $1 billion. “The five-and-half year sukuk issuance helped the sovereign to diversify funding, tap GCC Islamic investors, deepen its debt capital market, and establish a reference curve for other Philippine issuers to issue sukuk,” Fitch Ratings said. The brief read that the Philippine government aimed to boost financial inclusion among Filipino Muslims, who form about six percent of the population but are largely underbanked. Islamic banking is estimated to have below a 1-percent market share in the majority-Catholic country. Official government data from the Philippine Statistics Authority (PSA) showed that Islam is the most predominant religion in the Barmm; accounting for 4.49 million persons or 90.9 percent of the 4.94 million household population in the region in 2020. It was followed by Region IX-Zamboanga Peninsula with 18.2 percent, Soccsksargen with 15.8 percent, Region X-Northern Mindanao with 8.5 percent, and Region XI-Davao and the Mimaropa Region with 3.5 percent each. “The 2023 sovereign sukuk is the only sukuk issued by an entity in the Philippines to date. However, growth is anticipated in the long-ter