Singapore’s Shariah market: Small but mighty, aiming for the big leagues

• Sophistication, strategy help Singapore’s market shine against bigger neighbors
• Leveraging on strengths for niche in Sukuk, Islamic fintech and Shariah ESG
• Strategic location to tap investor appetite of regional Muslim population

Overview

Singapore’s Islamic funds market is small relative to that of its neighbors Malaysia and Indonesia. What's lacking in size though is made up by sophistication and strategy – not surprising in a city of economic dynamism with a New York-like skyline bursting with skyscrapers.

With a modest 10 funds covering a total asset size of just under US$430 million, Singapore’s Shariah business is dwarfed by Malaysia’s almost US$40 billion industry of more than 600 funds and Indonesia’s near US$3.5 billion sector of under 250 funds, the IFN Investor Funds Database shows.

The real story, though, is what's driving Singapore’s growth in the sector. While not in the same league as Malaysia in the north and Indonesia in the south, the Islamic investment industry in Singapore is leveraged by superior wealth management, project and trade financing as well as fintech.

Coupled with strong sovereign ratings and access to world-class investors, the city-state can attract the biggest corporations and high net worth individuals out to diversify existing Shariah portfolios or those wishing to dip their toes in the sector for the first time. As a result, Singapore has carved niche growth areas in cross-border Sukuk, Islamic fintech and Shariah compliant ESG products.

The government has also played a crucial role in harmonizing tax and regulatory frameworks to accommodate Islamic financial products. This positions the city-state to lead a quiet revolution in the sector.

Asset spread

Singapore fares well in the IFN Investor Funds Database – which tracks 1,109 Islamic funds in seven Asia Pacific countries, with a total AuM of US$50.67 billion.

Malaysia ranks first with 604 funds and US$39.58 billion, followed by Pakistan (211 funds, US$6.02 billion); Indonesia (240 funds, US$3.59 billion) and India (five funds, US$533.82 million).

Singapore ranks fifth with its 10 funds and AuM of US$428.79 million, after which comes Australia (eight funds, US$354.39 million) and Thailand (nine funds, US$26.97 million).

Chart 1: Asia Pacific Islamic funds by country breakdown

Among asset classes, mixed assets dominate Singapore’s Shariah offerings, accounting for US$217.43 million, or just over 50%, of total AuM. Fixed income funds are the next largest category at US$74.7 million, followed by equities at US$23.86 million. Other unspecified categories amount to US$112.79 million.

The breakdown shows that while there are fewer than a dozen funds, there is a diverse range of assets available to investors.

Chart 2: Singapore Islamic funds by asset class

Fund performance

The Singapore Islamic finance sector has shown encouraging performance, with Maybank and Lion Global Investors leading the market.

The largest fund by AuM is the Maybank Asian Growth and Income-I Fund - Class A (Acc), with an AuM of US$97.98 million.

Table 1: Top Singapore Islamic funds by AuM

The top-performing fund by one-year return is the PRUlink Islamic Global Equity Index Fund (Accumulation) from Prudential Singapore, with a return of 9.3%.

The Lion-BIBDS Islamic Enhanced Liquidity Fund and the MAMG Global Sukuk Income-I Fund also delivered strong one-year returns of 4.76% and 3.73%, respectively.

Table 2: Top Singapore Islamic funds by one-year return

Regulatory framework

Unlike some of its neighbors, Singapore does not have a separate set of laws for Islamic finance. Instead, it uses a "fine-tuning" approach to integrate Islamic and conventional banking within a common regulatory framework.

This approach involves perfecting existing regulations rather than creating new ones. The country has no specific Shariah advisory council at the central bank level, and Shariah advisory boards only bind the Islamic financial institutions that appoint them. This contrasts with countries that have legal provisions for Islamic finance.

Outlook

Singapore's Islamic finance market has a lot going for it, particularly with its ability to leverage the strength of the global financial hub that underrides its economy. The real story, though, is what's driving this growth.

The key drivers for growth are regulatory developments and market expansion. The sector is expected to see continued growth in 2025, driven by ongoing demand for Islamic products and services.

Singapore's Shariah market is a work in progress, but one with promising potential as it is offering itself as a natural fit for both corporate and institutional Islamic investments.

Focus is expected to continue in key growth areas including cross-border Sukuk, Islamic fintech and Shariah compliant ESG investment products.

Despite its small domestic market, the country's strategic location and sophisticated financial infrastructure position it to serve the massive Muslim population in the region and globally.