Key Highlights:
- Singapore adopts a unified legal framework that applies equally to Islamic and conventional financial entities
- The FTSE ST Singapore Shariah Index is the inaugural index that monitors Shariah compliant equities on the stock exchange
- The IFN Investor Funds Database recorded nine Shariah compliant funds in Singapore with a combined total value of US$259.35 million
Overview
While Singapore is recognized as a global financial hub with a sophisticated financial industry that supports significant capital flows, Islamic finance has not yet gained the same level of prominence as its conventional counterpart in this secular and predominantly non-Muslim island-state.
But given its location in Southeast Asia, next to the two major Islamic capital markets of Indonesia and Malaysia, private sector initiatives combine this proximity and Singapore’s advantages to offer services related to asset management and private credit – including ethics-based operations.
As reported by the Monetary Authority of Singapore (MAS), total assets under management (AuM) stood at SGD5.4 trillion (US$4.17 trillion) at the end of 2023, with 1,250 licensed and registered fund management companies.
Furthermore, MAS stated that among asset managers based in Singapore, monies managed with ESG overlay constituted 51% of total AuM and 284 asset managers reported that they offer ESG strategies in 2023. ESG assets are generally considered to be Shariah compliant.
Regulatory framework
Singapore’s regulatory framework for Islamic finance differs from that of other jurisdictions. Currently, there is no specific legislation governing Islamic finance in Singapore. The primary regulatory authority overseeing the banking and finance sector is MAS, which also functions as the country’s central bank.
Singapore’s strategy involves refining existing financial regulations rather than introducing new ones, resulting in a unified legal framework that applies irrespective of whether the relevant entity is an Islamic or a conventional body.
While MAS does not have a dedicated Shariah advisory council, each financial institution offering Islamic products and services is required to establish its own internal Shariah advisory board to ensure that the institution’s banking and investment activities adhere to Shariah principles.
The Islamic Religious Council of Singapore (MUIS) serves as a statutory body responsible for interpreting Islamic law. Since banking and finance issues are classified as civil matters, MUIS does not possess the authority to issue binding resolutions. Consequently, any Islamic rulings or Fatwas pertaining to banking and finance are regarded as advisory in nature, rather than legally-binding.
Investment market
Singapore’s Shariah financial market instruments are broad, including products like mutual funds, exchange-traded fundss, REITs and Sukuk. Sovereign level Sukuk is issued by MAS, with 2009 marking the inaugural SGD200 million (US$154.45 million) Sukuk Al-Ijarah Trust Certificate Issuance Program.
Private Sukuk issuances are rare – as of the time of writing, there was only one private Sukuk offered by White Lion Foods, a Latin American group headquartered in Singapore, accessible through the RizqX platform.
The FTSE ST Singapore Shariah Index tracks Shariah compliant equities listed on the exchange. Public investors can access Shariah compliant REITs through the Singapore Exchange while Islamic mutual funds can be access by the through various platforms like iFAST,
Islamic crowdfunding is possible through Shariah compliant platforms like Ethis and Kapital boost.
Asset management
As of the 1st October 2024, the IFN Investor Funds Database tracked nine funds with a total US$259.35 million in value. These funds are all open-ended and respectively offered by AIA Singapore, Lion Global Investors, Maybank Asset Management, Principal Asset Management, Prudential Singapore, Income Insurance and Franklin Templeton.
Chart 1: Islamic fund type breakdown in Singapore
Source: IFN Investor Funds Database
Table 1: Top five performing Islamic funds in Singapore in Q2 2024
Fund | Fund manager | Three-month returns (%) |
Principal DALI Opportunities Fund – Class SGD | Principal Asset Management | 12.16% |
Maybank Asian Growth and Income-I Fund | Maybank Asset Management | 4.24% |
Income Insurance Takaful Fund | Income Insurance | 1.9% |
PRUlink Islamic Global Equity Index Fund (Accumulation) | Prudential Singapore | 1.7% |
AIA Shariah Global Diversified Fund | AIA Singapore | 1.54% |
Source: IFN Investor Funds Database
Outlook
Singapore’s Islamic finance and investment industry is still a work in progress. Demand for Islamic financial products is growing among both Muslim and non-Muslim communities, driven by increasing education and awareness. Ground-up initiatives from organizations such as MUIS and various private sector initiatives, plus government recognition via MAS, have been instrumental in fostering growth in the Shariah assets landscape.
With its strong legal framework and political stability, Singapore provides a competitive advantage that Islamic financial institutions can leverage to further develop the Shariah assets industry. Thus far, the growth of the Islamic investment landscape in Singapore has largely been organic and grassroots-led. If the successes of recent product launches and initiatives continue, Singapore could emerge as a model for other Muslim-minority countries to emulate.