TLTR (Summary)

Islamic Structured Deposits (ISDs) offer a unique investment opportunity that combines principal protection, ethical financial practices, and market-linked returns. Fully compliant with Shariah principles, ISDs avoid interest (riba), uncertainty (gharar), and investments in sectors deemed harmful like gambling and alcohol, appealing to both Muslim and non-Muslim investors who prioritise social responsibility. They provide security through principal protection and annual profit payments while offering growth potential tied to Shariah-compliant assets. However, ISDs investors must also consider the risks involved such as variable returns, reinvestment challenges, and early withdrawal penalties. Before investing, investors should assess their financial goals and determine whether ISDs align with their risk and return profiles.

Unlocking the Potential of Islamic Structured Deposits

Navigating the world of investments often comes down to finding a balance between security and growth. ISDs offer a compelling solution by combining the assurance of principal protection with opportunities for asset-linked returns, all while upholding principles of fairness and integrity. Designed to align with Shariah-compliant values, these financial products avoid interest-based returns, speculative risks, and investments in impermissible asset classes or sectors.

In this guide, we explore the key features of ISDs, their unique advantages, associated risks, and what makes them a strategic choice for investors. By understanding how ISDs function and their alignment with impactful investment principles, you can make more informed financial decisions while staying true to your values.

The Fundamentals of Islamic Structured Deposits

ISDs are designed to provide a balance between capital preservation and growth opportunities, all while adhering to Shariah principles. Supervised by a dedicated Shariah advisory board, ISDs ensure that all components of the investment—from asset selection to profit generation—align with ethical and permissible financial practices. Here are the key principles that define ISDs:

1. Shariah Compliance

ISDs are structured in line with Shariah principles under the supervision of qualified Shariah advisors. Funds are exclusively invested in halal (permissible) activities and assets, ensuring that the investment avoids prohibited sectors such as gambling, alcohol, and interest-based financial services.

2. Profit-Sharing Mechanism

ISDs operate on profit-sharing contracts such as:

• • Cost-Plus Sale (Murabahah): The bank purchases an asset and sells it to the investor at an agreed profit margin.
  • Agency (Wakalah): The bank acts as an agent, investing the funds on behalf of the depositor in Shariah-compliant opportunities.

Instead of accruing interest (riba), returns are derived from actual profits generated through permissible investments, ensuring compliance with Islamic financial ethics.

3. Capital Preservation

One of the most attractive features of ISDs is their capital-guarantee. The principal amount remains protected as long as the deposit is held until maturity, providing investors with a safety net for their investments.

4. Returns Linked to Performance

ISDs offer returns tied to the performance of Shariah-compliant underlying assets or indices, such as:

• • Commodities (e.g., gold, oil, or other tangible assets).
  •  Islamic bonds (Sukuk).
  • Islamic stock indices (e.g., Dow Jones Islamic Index).

This performance-based structure allows investors to benefit from market growth while adhering to ethical investment principles.

5. Avoidance of Interest (Riba)

ISDs completely avoid interest-based returns, which are unlawful in Islamic finance. Instead, returns are earned through profits generated from legitimate, Shariah-compliant economic activities. This distinction makes ISDs fundamentally different from conventional structured deposits.

How Does an Islamic Structured Deposit Work?

Investing in an Islamic Structured Deposit involves depositing a sum of money with a financial institution for a fixed term. Unlike fixed deposits, which offer a predetermined interest rate, the returns on structured deposits are usually variable and linked to the performance of specific underlying assets.

Here’s a closer look at how they function:

1. Investment Structure

ISDs begin with the investor depositing a sum of money with a financial institution for a fixed term. Unlike conventional structured deposits, ISDs are built on Shariah-compliant contracts such as:

• Cost-Plus Sale (Murabahah): The bank purchases assets and sells them to the investor at an agreed profit margin.
• Agency (Wakalah): The bank acts as an agent to invest funds on the investor’s behalf in Shariah-compliant activities.
• Commodity Trading (Tawarruq): Funds are used to trade commodities to generate liquidity in a permissible manner.

These structures ensure that profits are generated through real economic activities and lawful transactions, avoiding interest (riba) or speculative practices (gharar).

2. Variable Returns

Unlike fixed deposits that offer predetermined interest, ISDs provide returns that vary based on the performance of the underlying Shariah-compliant assets. If the selected assets perform well, investors can enjoy enhanced profits. However, the variable nature of returns means there is also a possibility of receiving lower returns.

3. Principal Protection

The principal amount is protected and returned 100% at maturity. The returns are also guaranteed as the underlying is Shariah-compliant commodity murabahah that comes with known mark-up profit in the trade accordingly, and the variable component is contingent upon the performance of the underlying assets.

4. Investment and Maturity

ISDs usually require a higher minimum investment and may have longer maturity periods than fixed deposits. They are designed for investors looking for market exposure that provides the security of principal protection.

Upholding Integrity in Islamic Structured Deposits

ISD functions on the principles of risk-sharing, avoidance of interest (riba), and asset-backed investments. The adherence to these principles ensures the equitable distribution of risk and return between the investor and the institution, and that tangible economic activity is generated, aligning with a values-based investment psyche.

ISDs differ significantly from conventional fixed deposits in both concept and application. Conventional fixed deposits typically involve lending money to the bank in exchange for guaranteed interest, allowing the bank to use the funds as it sees fit.

In contrast, ISDs focus on investing/trading in specific Shariah-compliant assets, with returns dependent on the actual performance of these investments. This introduces an element of risk-sharing between the depositor and the bank, aligning with Islamic financial principles of fairness and mutual benefit.

The distinction in risk and return is another defining feature. While conventional fixed deposits offer a predetermined, guaranteed return, ISDs provide a fixed annual bonus rate with the potential for an additional bonus rate based on the performance of underlying Shariah-compliant benchmarks or market conditions. This structure ensures that investors enjoy both stability and growth opportunities.

Ethical considerations also set these deposits apart. ISDs ensure that funds are invested in permissible and ethical industries. Conventional fixed deposits typically do not impose such ethical investment restrictions.

These distinctions highlight the unique appeal of ISDs. By combining capital preservation, a fixed profit rate, and opportunities for additional market-linked returns, ISDs offer investors a principled and transparent solution to grow their wealth in alignment with their values and financial objectives.

Why Consider Islamic Structured Deposits?

ISDs are tailored to address the core needs of investors by focusing on three key priorities: capital preservation, flexibility, and profit potential. More than just financial solutions, ISDs enable investors to align their personal values with long-term financial aspirations.

For those prioritising capital guarantees, ISDs provide the assurance of principal protection when held to maturity. This means your initial investment remains safe, offering peace of mind in uncertain markets. Unlike riskier investments, ISDs provide a balance between security and growth, making them particularly appealing to conservative investors who value safeguarding their wealth.

Understanding liquidity is important when embarking on an ISD. While ISDs are typically structured with fixed investment terms, they often include early withdrawal provisions to accommodate unforeseen financial needs. Whether initiated by the bank or the investor, these options provide a degree of accessibility without requiring you to compromise your overall financial objectives. This flexibility makes ISDs a versatile tool for managing your portfolio effectively.

When it comes to profit, ISDs offer a compelling alternative to conventional products. The returns are linked to the performance of Shariah-compliant assets be it equities, commodities, or indices. This performance-based structure allows for potentially higher gains compared to fixed deposits, rewarding investors for participating in ethical and asset-backed ventures. The emphasis on risk-sharing ensures a fair distribution of returns, fostering a collaborative relationship between the investor and the financial institution.

ISDs are an excellent option for those with long-term financial goals – planning for future milestones, whether it’s retirement, education, or legacy building. By combining the stability of capital protection with the potential for enhanced returns, they support both wealth preservation and growth.

Risks to Consider Before Investing

As with all investments, it is important to understand the risks involved before committing. While ISDs offer attractive upside potential and principal protection, one of the primary risks is the variable nature of their returns. Unlike traditional deposits with fixed, predictable returns, ISDs include an investment component, meaning returns are tied to the performance of underlying Shariah-compliant financial assets or reference instruments. For instance, the profit rate on the Maybank Saver Series 2024 I-Structured Deposit – Tranche 1 is fixed and guaranteed upfront under the Commodity Murabahah principle, providing a stable and predictable base return. However, the potential for additional returns comes from a conditional bonus component tied to the performance of Shariah-compliant reference instruments, such as spot FX or other applicable financial assets.

Another significant consideration is the liquidity and reinvestment risk. ISDs are generally designed to be held to maturity, with limited provisions for early termination. If a customer chooses to terminate the ISD before maturity, the early withdrawal may be subject to costs such as unwind fees or mark-to-market adjustments, which could result in a payout less than the original principal amount. On the other hand, ISDs often include a callable feature, where the bank reserves the right to terminate the deposit early. In such cases, the customer incurs no direct costs, and the original principal amount is fully returned. However, customers may face reinvestment risk, as they might struggle to find a comparable or better-yielding product for their returned capital. For investors relying on consistent returns over the deposit’s tenure, this can pose a significant challenge.

Additionally, ISDs are not covered under the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011. This is a critical distinction from fixed deposits, as it means there is no government-backed protection of the principal or profit, and investors may not receive the expected returns or even the principal amount in the unlikely event that a bank defaults. As an ISD is issued by a particular bank, its credit risk is directly tied to the bank’s financial health.

Given these factors, investors are strongly encouraged to assess their suitability for this product and to consult with financial advisors before making a decision. Fully understanding the terms, conditions, and potential risks associated with ISDs is essential for informed investment planning.

Is an Islamic Structured Deposit Right for You?

When considering an ISD as part of your investment portfolio, it’s essential to evaluate several key factors to determine if it aligns with your financial objectives and risk profile.

Investment Objectives

Begin by clearly defining your financial goals. ISDs are designed to offer principal protection while providing the potential for returns linked to the performance of Shariah-compliant assets. If your aim is to preserve capital with the opportunity for growth, and you are interested in investments that adhere to ethical and Islamic principles, an ISD may be a suitable option. However, if you require immediate liquidity or are seeking high-risk, high-reward investments, other financial products might better serve your needs.

Risk Tolerance

Assess your comfort level with variable returns. Unlike traditional fixed deposits that offer guaranteed interest, ISDs may provide a fixed profit rate, with a variable component that enhances the returns of the ISD. This means that while there is potential for higher gains, there is also the possibility of lower returns. Consider whether you are prepared to accept this variability and the associated risks. Understanding your risk tolerance is crucial in determining whether an ISD aligns with your investment strategy.

Profit Links and Tenure

It’s important to comprehend how profits are calculated and the commitment required. ISDs typically have a fixed tenure, during which your capital is invested in Shariah-compliant assets. The returns are linked to the performance of these assets, and the profit is usually realised at maturity. Early withdrawal may result in penalties or reduced returns, so ensure that you are comfortable with the investment horizon and that the funds allocated to the ISD are not needed for immediate expenses. Additionally, familiarise yourself with the specific terms and conditions of the ISD, including how profits are calculated and any factors that may influence the returns.

In summary, determining whether an ISD is right for you involves a thorough evaluation of your financial goals, risk tolerance, and investment horizon. By carefully considering these factors and seeking advice from financial professionals, you can make an informed decision that aligns with your personal financial strategy and ethical values.

Maybank Saver Series 2024 I-Structured Deposit – Tranche 1

If you believe ISDs suit you or want to begin your investment journey with ISDs, you can consider the Maybank Saver Series 2024 I-Structured Deposit – Tranche 1, offered by Maybank Singapore. This product, referenced throughout this article, is designed for investors seeking ethical and Shariah-compliant investment opportunities. It operates under the supervision of Maybank’s Shariah Committee, ensuring strict adherence to Islamic financial principles. The commodities involved in the transaction are Shariah-compliant, and the structured deposit complies fully with Maybank’s terms and conditions for Islamic structured deposits.

Key Features:

• This ISD comes with a 6-year tenure, extending from the purchase date of 26 November 2024 to the deferred payment date of 26 November 2030, subject to early payment provisions.
• The deposit is denominated in Singapore Dollars (SGD) with a minimum purchase amount of SGD 30,000.
• The ISD guarantees repayment of the purchase amount if held to maturity, providing a layer of security for investors.
•  Investors enjoy annual profit payments at a rate of 2.60% per annum, calculated using the formula: Purchase Amount × Profit Rate × Day Count Fraction.

Potential Returns:

• The ISD offers a maximum potential total profit of 17.60% over the tenure if there is no early payment by the bank.
• Bonus Feature: An additional 2% bonus of the purchase amount may be paid if the USD/SGD exchange rate falls within the specified range of 1.2800 to 1.3000 on 24 November 2025. This unique variable component enhances the product’s appeal by providing the potential for higher returns.

Figure 1. Profit payment structure of Maybank Saver Series 2024 I-Structured Deposit – Tranche 1

Tenure	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Maximum Potential Profit and Bonus
Profit Rate	2.65%	2.65%	2.65%	2.65%	2.65%	2.65%	14.25%
Bonus	+1.00%

Note: All investments involve an element of risk, including capital and principal loss. Past performance is not necessarily a guide to or an indication of future performance. For the latest figures, visit Maybank’s website here.

Early Payment Options:

It is important to note that Maybank retains the right to exercise an early payment option with a minimum notice of five days. However, customers may also request voluntary early payment by providing prior written notice, subject to Maybank’s discretion.

If the bank calls back the ISD early, the original purchase amount (the principal) will not be reduced. The principal amount is guaranteed and will be returned in full, subject to the terms specified in the term sheet. Additionally, there will be no early payment cost imposed on the customer in this scenario, as the bank initiates the early redemption.

However, it is essential to note that if the bank exercises this option, customers will have to forgo the opportunity to earn any future profits or bonus payments that would have been applicable had the ISD been held to its maturity date.

If the customer terminates the ISD early, the early payment may be subject to costs determined by the bank, such as unwind or mark-to-market costs. This could result in the payout being less than the original purchase amount.

Your Guide to Start Investing in Islamic Structured Deposits

This guide outlines the steps to participate and highlights complementary wealth management services that can enhance your investment experience.

Eligibility and Process:

1. Assess Eligibility: Begin by ensuring you meet the eligibility criteria set by the financial institution offering the ISD. This includes being of legal age and meeting any minimum investment requirements.
2. Select a Financial Institution: Choose a reputable bank or financial institution that offers ISDs. Research their product offerings, Shariah compliance certifications, and customer reviews to make an informed decision. Maybank offers a suite of Shariah-compliant and ethical investment solutions to meet your investor needs and financial goals.
3. Consult with a Financial Advisor: Engage with a financial advisor who is knowledgeable in Islamic finance to discuss your investment objectives, risk tolerance, and the specifics of the ISD to ensure that the product aligns with your financial goals and ethical values. Front-line staff at Maybank are well-trained to inform and address your queries and questions on Islamic financial offerings.
4. Review the Product Terms: Carefully read the terms and conditions of the ISD, including details about profit rates, investment tenure, early withdrawal policies, and any associated fees. Understanding these aspects is crucial before committing your funds. Only when you are satisfied with the product details do you proceed to invest the required amount. This can typically be done through a bank transfer or by depositing funds directly into your account with the institution.
5. Monitor Your Investment: Regularly review your investment statements and stay informed about the performance of the underlying assets. Maintaining communication with your financial advisor can provide ongoing insights and guidance.

Integration with Wealth Management Services:

You can consider continuing your investment journey by integrating it with complementary Islamic wealth management services. Maybank offers several Islamic Wealth Management (IWM) services at your convenience such as Zakat calculation, Takaful, and estate planning services. This can further supplement your long-term financial goals and ensure added peace of mind while investing.

By following these steps and integrating complementary wealth management services, you can holistically participate in ISDs beyond financial growth and ensure adherence to Islamic principles in all aspects of wealth management.

Empowering Your Financial Future with Islamic Structured Deposits

Islamic Structured Deposits are an excellent avenue for investors who wish to blend their long-term investment goals with their ethical and Shariah-compliant needs. While providing principal protection, one can expect significant growth potential, depending on the underlying assets that the ISDs are based on. These deposits offer an ethical alternative to conventional products, ensuring investments avoid prohibited industries while promoting fairness, transparency, and shared prosperity.

As global interest in ethical and values-based investments continues to rise, ISDs are positioned to play a significant role in shaping the future of responsible wealth management. Financial institutions are increasingly innovating within the Islamic finance ecosystem, offering diversified ISD products tailored to evolving market demands. These developments create exciting opportunities for investors to engage with Shariah-compliant, impact-driven solutions that foster sustainable growth and equitable wealth distribution.

Take the next step in empowering your financial future. Explore Maybank’s wide range of Islamic financial offerings and see how they can align with your values and goals. Whether you’re planning for retirement, education, or legacy building, ISDs offer a robust and ethical investment solution. To find out more, visit the nearest Maybank branch or through the following channels:

• Email iwmsg@maybank.com
• Call 1800-MAYBANK (1800-629 2265) or (65) 6533 5229

Frequently Asked Questions

 

• How Is Profit Generated in Islamic Structured Deposits?

Profits are generated based on the underlying assets the instrument is tied to. In ISDs, the profits are tied to Shariah-compliant assets.

• Are Returns Guaranteed?

Returns are guaranteed based on the fixed profit rate, if there is no callback on the ISD.

• Can Non-Muslims Invest?

Anyone can invest in ISDs. ISDs are suitable for those looking for shariah-compliant instruments, as well as those who are looking for an ethical investment alternative.

• What Shariah Concepts Apply?

ISDs usually employ a murabahah model and a wakalah model. These models ensure Shariah compliance while allowing for profit generation.

• How Are These Products Regulated?

Maybank’s ISD products follow the regulations of the Monetary Authority of Singapore.

 

This article was brought to you in collaboration with Maybank Singapore – Islamic Wealth Management, and  has not been reviewed by the Monetary Authority of Singapore.

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