SEC Encourages Firms to Offer Shari’ah-Compliant Products to Boost Islamic Finance Market

The Securities and Exchange Commission (SEC) is actively encouraging companies to offer Shari’ah-compliant investment products to foster the development of the country’s Islamic finance market. This initiative is based on the newly issued Sukuk framework, with the SEC formally introducing guidelines on the issuance and disclosure of Sukuk in partnership with the Asian Development Bank (ADB). SEC Chairperson Francis Lim stated, “Our vision is simple: a Philippine capital market that is deeper, broader and more inclusive – a market where every legitimate source of capital can find a place, and every investor can participate with confidence. Islamic finance is part of that vision.” He emphasized the importance of the market being ready to serve investors whose financial decisions are shaped not only by economic returns but also by faith, values, and ethical principles. Sukuk refers to certificates of equal value representing undivided investment, interest in or rights to the underlying assets, usufructs and services or projects undertaken in accordance with Shari’ah principles. Through Memorandum Circular 12, Series of 2026, effective March 2026, the SEC has established a regulatory framework for Sukuk issuances. This includes rules on its registration, permissible structures, and reporting and disclosure requirements of issuers. Currently, 58 Shari’ah-compliant securities are listed on the Philippine Stock Exchange, and the Philippine government issued $1 billion worth of Philippine Sukuk in 2023. The new guidelines allow Sukuk issuances to be made using Shari’ah-compliant structures as well as other Sukuk structures that may be approved by the SEC. The creation of special purpose entities for Sukuk issuances is also permitted. Furthermore, the SEC has adopted the latest financial reporting pronouncements to keep the country’s financial reporting framework aligned with evolving accounting and sustainability reporting requirements. This incorporates the Philippine Financial Reporting Standards (PFRS) and Philippine Interpretations Committee Questions and Answers (PIC Q&A) into the SEC’s rules and regulations. These efforts aim to diversify the Philippine capital market, attract investment from both domestic and international sources, and thereby accelerate economic growth. Notably, it holds the potential to strengthen economic ties with Islamic countries and position the Philippines as a hub for Islamic finance in the region.