Singapore still has huge gaps in Shariah-compliant Islamic financial products, industry players say


Maybank currently offers the widest range of Sharia-compliant banking products in Singapore and competes primarily with Malaysia-headquartered CIMB in Islamic retail banking.

According to Nor Mohamed, the bank’s Islamic activities have grown. “Maybank Singapore’s total Shariah-compliant funding and deposits grew at compound annual growth rates of 4% and 11%, respectively, over the past four years, from 2017 to 2021.”


Takaful was largely removed from Singapore when HSBC downsized its Islamic subsidiary Amanah globally in 2012 and ceased retail operations in the country. Currently, the only takaful product available is travel health services for Hajj and Umrah pilgrims, offered by ST&T International and UOI.

The potential of real estate finance has kept it at the top of the Islamic banking industry’s agenda for over a decade. Property finance is a big pot in Singapore, where home ownership is around 90%.

Outstanding bank loans for public and private housing reached S$210.23 billion ($156.39 billion) in the third quarter of 2021, according to preliminary figures from the Monetary Authority of Singapore.

Nor Mohamed said Maybank sees “decent business potential, as property is prevalent in Singapore, and owning residential property is a stable investment in the fixed asset category for property investors.”

Islamic housing finance would require the approval of the Central Provident Fund (CPF) Board and the Housing and Development Board (HDB). A major challenge is the type of underlying Islamic contract used which will align with the CPF law in terms of the type of assets that CPF savings can buy. The CPF is a compulsory social savings scheme whose funds are intended for the purchase of housing, retirement and personal health. A percentage of these savings can also be invested in approved funds. HDB public housing accounts for 78.7% of Singapore households, highlighting the importance of engaging with the HDB board for discussions on Islamic finance.

Anecdotal reports indicate an increase in demand for Islamic real estate finance from Muslims, and the issue is topical enough to recently prompt a question from an MP, bringing the issue to a national prominence.

The Minister of Manpower, as head of the line ministry of the CPF board, replied in January: “If financial institutions approach the competent authorities to authorize the use of CPF for such products, the CPF Board and authorities will assess these proposals, taking into account the need to protect the retirement savings of CPF members.

Maybank Singapore has confirmed that it is in talks to provide Islamic real estate finance facilities. “We are engaging all stakeholders in hopes of a successful launch in due time,” said Nor Mohamed.


Sani Hamid, who heads the dedicated Islamic Wealth Advisory (FAIWA) division of the Financial Alliance, also has Islamic housing finance on his wish list for the 2022 budget, which he is the second to get a Sukuk fund approved. by the CPF for investment.

“There is currently only one Shariah-compliant fund that is approved by the CPF,” Hamid said, referring to the Franklin Templeton Shariah Global Equity Fund, one of 82 approved funds as of Feb. 3.

Singapore banks hold assets of around $2 trillion, but the asset management sector is larger: $3.5 trillion in 2020. Singapore has more assets under management (AuM) than the global Islamic finance industry as a whole, which Refinitiv estimates at $3.374 trillion in 2020.

There is no breakdown of Sharia-compliant AuMs, but Hamid stressed that the options are limited. In Financial Alliance’s experience, the key to growing Islamic investments at the retail level is in CPF funds, as few people invest in cash. For those with money, FAIWA offers access to a gold mining fund, and wealthy individuals can put their money into a private equity fund targeting the UK healthcare sector which has received l endorsement from the International Shariah Research Academy for Islamic Finance Malaysia.

Alternatives include waqf pouches; the peer-to-peer Islamic crowdfunder Kapital Boost, which offers short-term investments through SME fundraising campaigns; and stocks that can be referenced from indices such as the FTSE SGX Shariah Index Series.

There are currently nine locally registered robo-advisors, but none offer Islamic options. Wahed Invest is accessible, although it is not licensed by the Singapore authorities.

While domestic demand is still limited, FAIWA has expanded its regional network. In 2020, 78% of Singapore’s AuM came from overseas, including 34% from Asia-Pacific, according to central bank data.

“We have also attracted offshore money, Malaysian money, for example, from customers who have money parked here in Singapore,” Hamid said.

Maybank also has its sights set on this venture. “Maybank Singapore sees opportunities in the Islamic Wealth Management segment, to attract ‘Sharia’ dollars from around the world, especially from Muslim countries, to invest in Singapore by leveraging Singapore’s strengths as a hub regional financial, regional wealth management center and country politically and economic stability,” said Nor Mohamed.


FAIWA says demand is improving. “We used to get calls or emails once a month; then it became once a week, but now it’s sometimes twice a week,” said Hamid, whose company actively organizes seminars and workshops on Islamic financial planning.

“They have been instrumental in promoting change, especially for those reluctant to adopt Sharia-compliant solutions,” he added.

However, Maybank, which targets the general population (Muslims make up a 15.6% minority of Singapore’s 5.7 million people), says there is not enough awareness in the together. “Structured educational programs in Islamic finance are vital for the retail, corporate and institutional segments as our observations indicate low awareness among them,” Nor Mohamed said.

It recommends “closer collaborations between regulators, Islamic financial institutions, professional associations and community associations to jointly promote Islamic finance. […] For demand-driven, Sharia-compliant solutions, industry vendors need to focus more on innovating their products and services and adopting technology to deliver competitive advantages,” Nor Mohamed said.

Hamid said it was a “chicken and egg” situation: “When we get Islamic products, we are very happy, but we are also very aware that if these products do not receive good request, they could possibly be. removed from the shelf.

(Reporting by Emmy Abdul Alim; editing by Seban Scaria)

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