Singapore: Opportunities for Islamic Finance

Legal and regulatory

Islamic financial institutions in Singapore are subject to the same legislation under the country’s Banking Act as conventional institutions, with capital adequacies and requirements applicable to Islamic banking products in same way as conventional ones. MAS states that the regulatory approach is focused on addressing the risks to the soundness of the country’s financial institutions, with reviews in place of regulatory and tax treatment to expedite the issuance of Islamic financial instruments. In 2013, the government allowed the five-year tax window introduced in 2008 on specific Islamic finance instruments to lapse, although the tax treatment for Islamic instruments remains on par with conventional equivalents.

Business environment

In terms of positioning within the Islamic finance space, Singapore is in competition with jurisdictions such as Luxembourg and the Cayman Islands, which have established themselves as fund domiciles. In October 2013, Singapore signed an MoU with Malaysia and Thailand to develop the ASEAN CIS Framework enabling a cross-border offering of collective investment schemes (CIS). The framework was introduced and made operational in August this year, allowing investors to place funds and issuers to raise capital in any participating country without restriction. Singapore also signed up to an agreement with Australia, Korea and New Zealand in September last year which established the Asia Region Funds Passport (ARFP) to facilitate the distribution of CIS funds across the region, with both schemes providing a wider scope for Islamic investment through fund managers in Singapore.

Banking and finance

As a financial center, Singapore is showing a growing appeal for Islamic finance, being a destination for Sukuk roadshows by issuers including Emaar Malls Group, Damac Real Estate and Turkiye Finans. The country has 15 banks off ering Shariah compliant banking options and Islamic wealth management is a growing sector. According to industry experts, Islamic assets under management in Singapore are worth approximately US$4.37 billion, with over a third of those held by the 15 banks offering Shariah company banking options. Despite the launch of three new Shariah compliant retail funds in 2013 by Franklin Templeton Investments, there are still fewer than 20 Shariah compliant funds in available in Singapore, providing an incentive for the use if the country’s new passporting schemes by both investors and fund managers.

As well as funds, some Singaporean banks also off er Shariah compliant financing. At the start of the year, The Islamic Bank of Asia (IB Asia), a joint venture partnership between DBS Bank and GCC investors, agreed a SG$15 million (US$11.83 million) convertible commodity Murabahah facility agreement with Singapore-listed underground utilities construction and maintenance service provider Ley Choon Group Holdings. The investment has been recognised as the first Islamic private investment in private equity transaction in Singapore, with a flexible structure that allows for conversion into shares of Ley Choon at the option of IB Asia at a pre-agreed conversion price. In July this year, Singapore-based Atlantic Navigation Holdings obtained a four-year US$15 million financing facility from Maybank Singapore, which will be used to repay existing loans, with the remainder utilised as working capital and towards capital expenditure.

Sukuk and Islamic REITs

A total of 31 Sukuk has been issued in Singapore and the exchange lists a number of recent issuances including US$300 million Sukuk Wakalah issued at the start of the year by the Export- Import Bank of Malaysia, and the US$118 million Sukuk Murabahah issued by Golden Assets International Finance in July. In 2009, the Singapore government established a SG$200 million US$157.73 million Sukuk Al-Ijarah Trust Certifi cate Issuance Program as the Shariah compliant equivalent to the conventional Singapore Government Securities, with returns under the Sukuk tied to the risk-free yield of government securities of the same length.

In 2012, the Axiata Group priced a CNY1 billion (US$158.06 million) Sukuk Wakalah, which at the time was the largest yuan-denominated Sukuk issued, as part of its Sukuk program worth up to US$1.5 billion. Malaysia’s investment fund, Khazanah Nasional, has listed its two most recent Sukuk issuances; the Rantau Abang RM1.5 billion (US$475.4 million) Islamic medium-term notes program and the US$500 million exchangeable Sukuk issued via Khazanah’s Labuan-incorporated special purpose company Cahaya Capital, on the Singapore Stock Exchange; and the company’s US$483.9 million exchangeable Sukuk issuance in October last year was Singapore dollar denominated.

Sabana REIT was founded in 2010 and is Singapore’s first Islamic REIT. The trust holds 22 properties and in August 2014, announced it was in the process of acquiring a warehouse in the Changi South Industrial Estate for US$55 million, in a deal that is expected to be concluded in the final quarter of the year. The trust has experienced a tough year, with gross revenue for the second quarter of 2014 up by 17% in year-on-year figures, but net property income and income available for distribution both down as the country’s commercial property sector experiences a slowdown and the trust’s expenses continue to rise.

Challenges and opportunities

Islamic wealth management has been singled out as a potential area for growth for the Islamic finance industry in Singapore with potential for distribution among investors in Asia and the Middle East, as GCC investors look for new markets. Banks from Malaysia and the GCC including CIMB Islamic and UAE-based FGB have committ ed to an expansion of operations in Singapore and growth of their Islamic finance offerings.


This article first appeared in Islamic Finance News (24 September 2014, Volume 11, Issue 38, Page 14). For more information, please visit