What You Need to Know About Islamic Investments in Singapore

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Islamic investments are growing rapidly in Singapore. The country, which is the world’s third-best financial center behind leaders London and New York, is a growing Islamic investment hub. This is evident through the rise of 22% in Islamic investment (assets under management) since 2010. Apart from that, it also has a higher amount of outstanding Sukuk issuances than any other conventional jurisdiction, reaching a high of US$2.71 billion in 2014. Furthermore, Singapore is the only non-Muslim majority country among the top 15 countries for Islamic banking and investment.

Even though the corporate and institutional Islamic investment platform in Singapore looks set for forceful growth in the coming years, similar sentiment cannot be assumed for its consumer or retail investment space. This may be largely due to the lack of critical mass in Singapore, given its relatively small population, of which Muslims form less than a 15% minority, which has caused financial institutions in Singapore to shy away from developing Islamic consumer banking. However, this trend is positively changing.

According to Sani Hamid, Director (Economy & Market Strategy) of Financial Alliance Pte. Ltd., “we are certainly now seeing a higher demand from consumers who want to do their financial planning including investments in a Shariah-compliant manner.” He further continued that they now received more and more queries via social media and also a strong level of participation at Islamic financial planning seminars they hold. Sani heads Financial Alliance Islamic Wealth Advisory (FAiWA).

A similar sentiment is also shared by Helmi Hakim, a certified financial consultant in Singapore. Helmi also manages Takaful.sg, which provides a tool for Singapore Muslims to calculate the amount of riba (usury/interest) incurred in their loans. According to him, there is now more awareness amongst Singaporean Muslims of the need to plan their finances according to Shariah. This is evident through more inquiries and signed-up rates for Shariah-compliant instruments.

Thus far, there have been various Islamic investment types found in Singapore. Other investment options include HSBC Insurance Ethical Global Sukuk Fund, Maybank’s Singapore Unit Trusts Ethical Growth Fund, NTUC Income Takaful fund etc.  The table below summarised the Islamic investment activities in Singapore from its initial emergence in 1991 till the year 2017.

Summary of selected Islamic finance and Islamic investments in Singapore (1991-2017)

Year Activities
  • Mendaki Growth Fund (Amanah Saham Mendaki) was one of the world’s earliest Shariah-compliant funds
  • Availability of Islamic window facilities and takaful products
  • Launched of the Takaful Global Fund by HSBC (Singapore)
  • Malayan Banking Berhad (“Maybank”) introduced its Shariah-compliant Unit Trust Ethical Growth Fund
  • Majlis Ugama Islam Singapura (“MUIS”) launched a S$25 million musharakah bond to purchase an office building to replace certain wakaf properties originally held in trust by MUIS.
  • United Overseas Bank Limited acted as arranger of the US$35 million musharakah bonds issued by MUIS for the purpose of developing a mixed-use wakaf property.
  • The Takaful Global Fund established in 1995 has since been renamed as HSBC-Link Ethical Global Equity Fund
  • Islamic Far Eastern Real Estate Fund was set up by Singapore’s ARA Asset Management in partnership with Dubai Islamic Bank
  • Waived the imposition of double stamp duties in Islamic transactions involving real estate and accorded the same concessionary tax treatment on income from Islamic bonds that are applicable to conventional bonds
  • Establishment of a US$96 million murabahah facility for Baitak Asian Real Estate Fund I by Standard Chartered Bank
  • HSBC Insurance launched the Takaful Sinaran Fund
  • Launched the FTSE SGX Asia 100 Shariah Index which comprised of 100 Shariah-compliant Asia-Pacific stocks
  • Overseas Chinese Banking Corporation Limited became the first local bank to launch Shariah-compliant term deposits
  • MAS gave its approval to banks to engage in non-financial activities such as commodity trading and to facilitate murabahah transactions for clients’ investments
  • Applicability of income tax and Goods and Services Tax (“GST”) on some Islamic products was further clarified
  • Remission is granted on stamp duties for immovable property, incurred under a sukuk structure that is in excess of that chargeable in the case of an equivalent conventional bond issue
  • MUIS has innovated the issuance of sukuk for the development of waqf properties, which has put Singapore on the world map for product innovation
  • DWS Investments, the retail mutual funds arm of Deutsche Asset Management introduced Islamic funds.
  • The Development Bank of Singapore Limited (DBS Bank) launched the first Islamic bank in Singapore, the Islamic Bank of Asia
  • MAS announced its intention to develop a facility to issue sukuk on a reverse-enquiry basis
  • Daiwa Asset Management listed the first FTSE Japan Shariah ETF on SGX
  • City Development, a major property firm, launched Singapore’s first corporate sukuk through  S$1bln Islamic Trust Certificate Programme
  • Introduction of two tax incentives. The first incentive was the FSI-Islamic Finance award, introduced to encourage more prescribed Shariah-compliant financial activities to be done out of Singapore by granting a 5% concessionary tax rate for income from qualifying activities endorsed by an approved Shariah board. The second incentive was for offshore takaful and re-takaful business, which offered a 5% concessionary tax rate to an approved takaful insurer for income derived from writing offshore general takaful and re-takaful insurance.
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  • MAS S$200mln Sukuk al-ijarah Trust Certificate Issuance Program
  • Olam International, an SGX-listed global supply chain manager launched the ‘first of its kind’ initiative to use its agricultural commodity trade flows as a platform to structure commodity murabahah transactions
  • Olam International, an SGX-listed global supply chain manager closed a USD115mln Islamic syndicated murabahah facility and a USD100mln Islamic Revolving Trade Finance Facility
  • IDB placed its inaugural S$200mln trust certificate
  • MAS issued its guidelines on the application of its banking regulations to Islamic finance and new regulations permitting banks to conduct murabahah interbank placements, ijarah, diminishing musharakah financing and spot murabahah
  • Parkway Holdings Limited entered into a S$750mln syndicated murabahah financing facility, the largest Singapore dollar murabahah financing facility to date and one of the largest murabahah financing facilities worldwide
  • Malaysia state investor Khazanah sold S$1.5bln in sukuk transactions that drew a demand of 4.3 times its book size, making it Singapore’s largest sukuk sale (sukuk wakalah)
  • Sabana Shariah Compliant Industrial REIT, the world’s largest Shariah Compliant REIT by assets became the first Islamic REIT to be listed on SGX
  • Securus Data Property Fund established by Keppel Telecommunications & Transportation and AEP Investment Management, as the world’s first Shariah-compliant data center fund
  • Sabana Shariah Compliant Industrial REIT obtained S$144.3mln additional term and commodity murabahah financing, which was innovatively structured to include a profit rate hedge (IFN Guide 2012, “Singapore: High Expectations” by Suhaimi and Wico)
  • MAS circular was issued confirming that double or triple stamp duties would be waived on murabahah deposits where the asset is an immovable property (IFN Guide 2012, “Singapore: High Expectations by Suhaimi and Wico)
  • Establishment of Halal Universe, a news portal focused on Shariah-compliant investments for retail investors, the first ever portal of its kind in the world.
  • The concessionary tax on income derived from approved Shariah-compliant investments and activities was extended by another 5 years to the end of 2018 (QDS and QDS+ schemes)
  • Swiber Capital Pte. Ltd. becomes the second Singaporean company to issue a sukuk, being a 5-year S$150mln sukuk at a periodic distribution rate of 6.5%. This represents the first drawdown of its US$500mln Multi-Currency Islamic Trust Certificates Issuance Programme announced on the Singapore Exchange.
  • Middle-Eastern banks based in Singapore have also started offering Islamic window facilities for their corporate clients
  • Maybank launches its Islamic Home Financing and Islamic Commercial and Industrial Property Financing schemes, which allow Singaporean buyers to access properties in Malaysia. It also launched its Auto Finance product for vehicles based on the concept of al ijarah thumma al bai (AITAB).
  • Franklin Templeton launches 3 new Shariah retail funds in Singapore
  • CIMB offers services to Muslims in Singapore via Islamic windows at two of its outlets.
  • Sabana Shariah Compliant Industrial REIT raised S$100mln in September after selling S$90mln of the debt in March in a setback to Singapore’s ambitions to become an Islamic finance hub. It is the sole entity in Singapore to have sold sukuk in 2014
  • EthisCrowd.com, the world’s first Real Estate Islamic Crowdfunding platform  was set up by a local entrepreneur, Umar Munshi
  • Change to the tax framework, effective on the 8 April 2015 through the Stamp Duties (Islamic Financial Arrangements) (Remission) Rules 2015, giving a provision for the remission of stamp duty to Islamic financial arrangements such as diminishing musharakah, istisna’ and ijarah wa iqtina, provided that the Islamic financial arrangements are endorsed by a Shariah council, body or committee formed for the purpose of providing guidance on compliance with Shariah law.
  • The deputy managing director of MAS, Jacqueline Loh, confirmed that the apex bank was working in collaboration with industry participants and other government institutions to provide greater clarity in the regulatory and tax treatment for sukuk including a potential pre-approved standardized template for common sukuk structures
  • Fitch Ratings has assigned its first “A” rating on Insurer Financial Strength to Singapore-based Etiqa Insurance Pte. Ltd. (EIPF)
  • Kapital Boost SME P2P Crowdfunding platform was launched by Erly Witoyo, a former director of Barclays Singapore
  • Maybank Singapore announced its first-of-its-kind Islamic financing deal worth S$260 million together with RB Capital. The deal has a hotel, which is the 442-room mid-tier Holiday Inn Express Singapore Clarke Quay, as its underlying security. USD125.02 mln Islamic refinancing facility by one of the world’s largest Islamic real estate investment trusts, Sabana REIT
  • Sabana REIT confirmed plans to acquire three different properties and also met with China’s Sichuan Development Holding to explore Islamic finance opportunities.
  • Australian asset management firm Equitable Financial Solutions (EFSOL) launched an asset-backed Shariah-compliant fund
  • Monetary Authority of Singapore issued a trust license to Hawksford which offers Shariah-compliant trust services to private and corporate clients in the country for wealth needs.
  • Singapore Exchange announced that its Singapore Kilobar Gold Contract has become the world’s first Shariah-compliant gold futures.
  • Pergas Investment Holdings represented Singapore in the Brunei Darussalam Islamic Investment Seminar and became a participant of the United Nations Global Impact.
  • Maybank Singapore was awarded the Islamic Bank of the Year and Best Retail Bank in Singapore.
  • Qatar National Bank announced its plans to turn Singapore as an Asian hub to expand Islamic banking operations to other countries e.g. Indonesia, Vietnam, India, etc.
  • Arab Banking Corporation offers Shariah-compliant solutions and has appointed its new general manager for its Singapore branch and head of Asia.

Source: Author’s Own

All in all – booming market

Although Singapore remains a relatively new market participant in the Islamic finance space along with challenges ahead in its bid to develop the industry, overall the growth of the Islamic investment space in Singapore can be deemed as encouraging. Apart from greater awareness by Singaporean Muslims now and the growing corporate and institutional investment platforms, it is noteworthy to highlight that the government is also playing a crucial role in harmonising the tax and regulatory treatment of Islamic finance products.

Finally, of course, this short article cannot fully appreciate the nuances found in Islamic investment activities in Singapore; however, it merely attempts to give an overview of the overall Islamic investment activities found in Singapore today.

This article was first published in March 2018 and has been edited and updated for accuracy and clarity. Edited by Anis Shakirah Mohd Muslimin. 

Read more 7 Reasons Why Fintech Adoption is Still on the Rise

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We operate ethical investment platforms approved by regulators in Indonesia, Malaysia, and Dubai, and also run a charity platform Global Sadaqah serving ordinary people, high-net-worth individuals, corporates and government entities. Best known for crowdfunding impact investments for Indonesian social housing development projects we adhere to the United Nations Global Compact ethical standards and are based on Islamic finance.