Preheat the oven to 175°C (350°F). Grease and flour 2 round 8-inch cake pans.

In a bowl, sift together the flour, baking powder, and salt. Set aside.

In a large mixing bowl, beat the butter and sugar until light and fluffy, about 3-4 minutes.

Add eggs one at a time, mixing well after each addition.

Stir in vanilla extract.

Add flour mixture in three parts, alternating with coconut milk, beginning and ending with flour. Mix until just combined.

Gently fold in shredded coconut.

Divide batter evenly between prepared pans. Smooth the tops.

Bake for 25-30 minutes, or until a toothpick inserted into the center comes out clean.

Let cakes cool in pans for 10 minutes, then turn them onto a cooling rack to cool completely.

While cakes are cooling, make the frosting. In a bowl, beat the cream cheese and butter until smooth.

Gradually add powdered sugar, mixing until combined. Add coconut milk and beat until creamy.

Once the cakes are completely cool, spread frosting on top of the first layer. Place the second cake layer on top and frost the top and sides.

Press remaining shredded coconut onto the top and sides of the cake for decoration.