Unveiling the Economic Potential of Islamic Finance in the Philippines: Opportunities and Regulatory Challenges

Abstract

This study explores the economic potential of Islamic finance in the Philippines, highlighting its promise as an inclusive and ethical financial model. With a significant Muslim population and rising interest in Sharia-compliant financial instruments, the Philippines presents a fertile landscape for the development of Islamic finance. The research is grounded in the urgency of aligning with global movements toward ethical and inclusive finance, particularly in light of the financial exclusion faced by many Muslim communities in the country. Focusing on legal, institutional, and market-based dimensions, the study examines how Islamic finance can be effectively integrated into the Philippine financial system. It addresses two central research questions: How can Islamic finance be integrated into the national financial architecture? And what are the primary regulatory challenges and economic opportunities that shape its implementation? Employing a qualitative methodology, the study draws upon policy analysis, comparative case studies, and literature review to assess institutional readiness and stakeholder engagement. It benchmarks developments in the Philippines against regional and global standards, identifying strategic pathways for growth. The findings suggest that Islamic finance has considerable potential to enhance financial inclusion and stimulate ethical investment, particularly in underserved regions. However, achieving this potential will require significant regulatory reform, capacity-building, and greater public awareness. The study concludes with recommendations for strengthening institutional frameworks, fostering multi-stakeholder collaboration, and investing in education to ensure the long-term viability of Islamic finance in the country. Future research should further investigate the integration of fintech solutions, public awareness campaigns, and harmonisation of Sharia standards to broaden access and improve confidence in Islamic financial services.