The Securities and Exchange Commission (SEC) has approved a comprehensive regulatory framework for sukuk, or Islamic bonds, as part of efforts to diversify the Philippine capital market and attract investments, particularly from the Middle East. The move is seen as a significant step toward strengthening the country’s Islamic finance ecosystem.
Through Memorandum Circular No. 12 issued on February 25, the SEC outlined detailed guidelines governing the registration, structure, and disclosure requirements for Shari’ah-compliant securities. The framework provides issuers with a clear regulatory pathway to offer Islamic financial instruments in the domestic market.
Unlike conventional bonds that involve interest payments, sukuk represent undivided ownership in underlying assets, projects, or investment ventures. This structure ensures compliance with Islamic law, which prohibits interest-based transactions.
SEC Chairperson Francis Lim said the regulator recognizes sukuk as a strategic instrument for capital raising and investment activities, both locally and internationally. He added that the initiative also supports the country’s broader financial inclusion goals.
The new rules permit various Shari’ah-compliant structures, including hybrid models. Issuers are required to appoint an independent Shari’ah adviser or establish a Shari’ah supervisory committee to certify that all aspects of the transaction comply with Islamic principles.
Eligible issuers include publicly listed companies, non-listed stock corporations, and special purpose entities (SPEs). While the national government and state-supervised banks are allowed to issue sukuk, they remain exempt from registration requirements under the Securities Regulation Code.
To ensure investor protection, the SEC mandates comprehensive disclosure for public offerings. Issuers must clearly state the purpose of the issuance, explain transaction flows, and define the responsibilities of both the SPE and the originator. Publicly offered sukuk must also be backed by a trust deed and obtain a credit rating from an SEC-accredited or internationally recognized rating agency.
Although SEC registration establishes the legal framework for issuance, the listing and trading of sukuk will continue to be governed by the rules of the relevant stock exchange.