Preheat your oven to 350°F (175°C). Grease and flour two 9-inch round cake pans or line them with parchment paper for easier removal.
In a medium bowl, whisk together the flour, baking powder, and salt. Stir in the shredded coconut until evenly distributed.
In a large mixing bowl, beat the softened butter and granulated sugar together until light and fluffy, using a hand mixer or stand mixer.
Gradually add the flour mixture to the butter mixture, alternating with the coconut milk.
Begin and end with the flour mixture, mixing until just combined after each addition. Do not overmix.
Divide the batter evenly between the prepared cake pans. Smooth the tops with a spatula.
Bake in the preheated oven for 25-30 minutes, or until a toothpick inserted into the center comes out clean.