Singapore: Too little too late?

Singapore’s prowess as a global financial hub is undeniable and while there have been efforts made to position itself in the Islamic financial markets, these have not translated into the success story many have hoped for. Vineeta Tan provides a breakdown of the Lion City’s Islamic finance ecosystem.

Regulatory environment

Singapore’s approach differs from neighbouring Malaysia in that it applies non-preferential treatment to create a level-playing field for both conventional and Islamic finance rather than providing tax advantages as practiced by the latter. Islamic finance and banking are governed under the same regulation, the Banking Act, which treats Shariah compliant finance within a secular legal structure, with no reference to Arabic names.

Nonetheless, like many other jurisdictions attempting to kickstart their Islamic finance industry, Singapore did make initial concessions to give the sector an advantage in its vastly conventional landscape. Several regulations were introduced between 2005 and 2009 legislating Shariah banking and financing instruments as well as amendments to tax regulations which removed additional tax obligations arising from the asset-based nature of Shariah transactions. In 2013 however, the central bank – Monetary Authority of Singapore (MAS) – allowed two Islamic finance tax incentives (rolled out in 2008) to expire; this led to doubts on MAS’s commitment to Islamic finance and banking. Yet despite so, the regulator has consistently reaffirmed its Islamic finance dedication. On the 8th April 2015, a conditional provision for the remission of stamp duty to Islamic financial contracts was made via the Stamp Duties (Islamic Finance Arrangements) (Remission) Rules 2015.

In June 2015, the deputy managing director of MAS, Jacqueline Loh, confirmed that the apex bank is 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.

Banking and finance

Singapore’s Islamic banking sector, however, was dealt a heavy blow as the country’s sole fully-fledged Islamic bank — Islamic Bank of Asia (IB Asia) — in September 2015 announced that it will be winding down its operations due to its failure in generating economies of scale. This is despite Shariah banking assets in Singapore growing 73% since 2010 and the number of banks involved in Islamic banking doubling to 15 over the five-year period since then. IB Asia’s parent DBS Group Holdings, however, has said that it will maintain an Islamic portfolio. Other prominent Islamic banking service providers include Maybank and CIMB.


Although Singapore has significantly deep and liquid capital markets (despite no real need to tap the debt capital markets, the country has been maintaining current account surpluses, averaging SG$8.42 billion (US$5.94 billion) from 1986-2015 according to Trading Economics), the same however cannot be said about the Islamic side. Government agencies have been active bond issuers in order to develop the nation’s capital markets; however in the past five years (since 2015), there have only been 31 Sukuk issuances in the country, according to MAS. Total outstanding issuance reached a high of SG$3.8 billion (US$2.68 billion) in 2014, a rise from SG$440 million (US$310.48 million) in 2009, the year when Singapore launched a Sukuk facility to provide regulatory assets for banks in the Shariah space.

There seems to be a reservation, or rather disinterest, from other government agencies (and corporates) to issue Shariah compliant securities. This could perhaps be attributed to the pervasiveness of conventional finance in the system, and with no incentives to pursue Islamic debt, issuers do not see a need to diverge from mainstream market practices.

The latest Sukuk issuance in Singapore was by Malaysia’s national mortgage company, Cagamas – a one-year Wakalah facility worth SG$162.75 million (US$114.84 million) that is part of the company’s US$2.5 billion multicurrency program.

Asset management

While Singapore’s Shariah banking and Sukuk segments may not be up to par, however Asia’s Switzerland is well positioned to leverage its sophisticated wealth management expertise and the burgeoning wealth of Asia to develop a strong Islamic asset management repertoire. From 2010-15, Islamic assets under management in the nation – which is home to the world’s largest Shariah compliant real estate investment trust, Sabana REIT – grew by 22%.


There is also a rise of Islamic crowdfunding platforms in Singapore. The city state is home to at least two of such platforms: Club Ethis and Kapital Boost which are rising in stature and facilitating cross-border investments.


On paper, it seems that Singapore has the financial makings to be a premier Islamic financial centre especially in terms of capital markets (Sukuk listings) and Islamic wealth management, but the lack of retail traction (due partly to a small Muslim population and the lack of product competitiveness) makes it challenging to build a substantial asset base for the (corporate) market to take off. This has not deterred interested parties from leveraging Singapore’s prime position as a leading international financial centre with Shariah expertise though: For example, Sichuan Development Holding Company in 2015 engaged Silk Routes Financial to advise its Islamic capital-raising exercise. The Singaporean firm in 2015 also entered into an MoU with Cathay Fund Management Company to establish a Shariah fund management platform in China.

A lack of regulatory support has often been cited as a main challenge for the industry, and for the island nation to capitalize on Islamic finance to deepen its trade ties with the GCC as well as tap into the lucrative infrastructure project opportunities in the region, there is, as ever, a crucial need for regulators and market players to work together to develop the segment.


This article first appeared in Islamic Finance News (6 January 2016, Volume 13, Issue 01, Page 26). For more information, please visit the website at