The Philippine Deposit Insurance Corporation (PDIC) on Wednesday said deposits in Islamic banks (IBs) and Islamic banking units (IBUs) are now officially insured up to P1 million per depositor, per bank.
The move provides the same insurance protection for deposits in these banks as that for conventional deposits under the enhanced maximum deposit insurance coverage, which took effect in March.
PDIC said these banks offer financial products and services, including deposits, that are compliant with Shari’ah Law, focusing on ethical financing, risk-sharing and socially responsible practices.
As of the end of December 2024, PDIC said there were 12,514 Islamic deposit accounts in the banking system.
Same level of protection
“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,” PDIC President and CEO Roberto B. Tan said in a statement.
He said the move aligns with the national government’s pursuit of promoting financial inclusion.
“(This will also) strengthen the Islamic banking sector in the country as this encourages more individuals and businesses to save in banks,” Tan said.
Positive for the industry
This is something positive for the Islamic banking industry, Chuchi Fonacier, Bangko Sentral ng Pilipinas (BSP) Deputy Governor said in a Viber message.
“Deposits in Islamic banks should be insured by PDIC similar to deposits in conventional banks,” Fonacier, also the head of BSP’s financial supervision sector, said.
In Islamic banking and finance, financial services must be consistent with Shari’ah principles, according to the BSP.
For instance, Islamic banks offer products that do not involve interest or “riba,” which is prohibited by the Shari’ah. Rather, they offer alternative arrangements to generate income.
Fonacier said there are two IBUs operating in Mindanao—Card Bank Inc. in Cotabato and Maybank in Zamboanga.
Those are aside from the Al-Amanah Islamic Investment Bank of the Philippines, which was established based on its own charter.
“No new bank applicants. But there are some who have shown interest,” Fonacier said.
Depositor confidence
Michael Ricafort, RCBC’s chief economist, said the move “will provide greater confidence for the depositing public and would help further grow and develop IBs.”
“Overall, this would provide greater protection and peace of mind for the depositing public, as a safety net, and would help promote greater stability and confidence in the banking industry — a blanket of protection, especially for retail deposits/mass market,” Ricafort said in a Viber message.
John Paolo Rivera, Philippine Institute for Development Studies research fellow, said the extension of deposit insurance coverage to IBs and IBUs “enhances public trust and promotes financial inclusion, particularly among Filipinos who prefer Shari’ah-compliant financial services.”
By providing the same P1 million protection per depositor, Rivera said PDIC ensures a level playing field, which can encourage the growth of Islamic finance in the country.
This move also signals that the Philippine banking system is maturing and becoming more inclusive, aligning with broader goals to diversify the financial sector and reach underserved markets, Rivera said, also in a Viber message.
“It is a significant step toward positioning the country as a potential hub for Islamic finance in Southeast Asia,” Rivera added.
