PHL Islamic finance could benefit from Gulf, ASEAN collaboration, Fitch says

THE Philippine Islamic finance industry could accelerate its expansion by collaborating with partners in ASEAN and the Gulf, Fitch Ratings said in a report.

“Development across ASEAN remains uneven, although enhanced links with GCC (Gulf Cooperation Council) countries and within ASEAN could boost industry penetration, attract investment and support financial inclusion,” the credit rater said.

In the first quarter, the Islamic finance industry of ASEAN was valued at $1 trillion, led mainly by  Malaysia, Indonesia and Brunei. The industry’s growth was supported by large Muslim populations, government support, the growth of the halal economy, and digitalization.

The Philippine Islamic finance industry remains in the early development stage, with total banking assets of about $44 million at the end of 2025.

In 2023, the Philippines raised $1 billion from a sukuk bond issue. The Philippines also has five licensed takaful operators.

Fitch Ratings said 49% of ASEAN Islamic finance in the first quarter was sukuk outstanding Islamic banking assets (41%), Islamic funds’ assets under management (AUM; 8%) and takaful assets (2%).

The credit rater also noted that almost half of outstanding global sukuk issues are from ASEAN.

Malaysia ranks first and Indonesia third globally, with most issuance in local currency.

Meanwhile, the Singapore Exchange was the sixth-largest global dollar sukuk listing venue as of the first quarter.

All Fitch-rated dollar ASEAN sukuk issues are investment-grade or at least ‘BBB’ as of April, with no defaults in the past four years.

However, 63% of ASEAN sukuk issuers have negative outlooks due to the revision of  the outlooks for Indonesia and the Philippines.

Fitch Ratings also noted the Iran conflict could impact sukuk issuers depending on their risk exposure to the war. — Aaron Michael C. Sy