Singapore Report 2023
INTRODUCTION – EMERGING DESTINATION OF CHOICE
The island nation of Singapore, home to over 5.6 million people, scored a major economic boost when, despite the gloomy global economic forecast, it hosted the first Formula One car race after three years of pandemic lockdown, drawing more than 300,000 people from all over the world. Even though the racing event was important for the economy, the most conspicuous development was that the world’s largest hedge fund, Bridgewater Associates, and Asia’s second-richest person, Mukesh Ambani, moved to the city-state.
On top of that, many family offices found Singapore as the best place to seek economic refuge in these uncertain times, with Russia and Ukraine at war; Europe coping with the energy crisis; the UK dealing with political turmoil; the US struggling with inflation; China’s economic slowdown; and Hong Kong experiencing an exodus of finance professionals. And according to the Global Financial Centres Index for the year 2022, Singapore is ranked as the top financial centre in Asia and third best in the world.
All in all, the Singaporean government remains cautious and prudent in its economic and trade policies. This is evident in the Monetary Authority of Singapore’s (MAS) fourth tightening of its monetary policy in the last 12 months and the S$1.5 billion support package to combat the running near 14-year high inflation, as well as their efforts towards supply-chain resilience via bilateral cooperation, such as Singapore-Australia Green Economy Agreement.
2022 REVIEW – GROWING DEMAND WORK IN PROGRESS
Singapore may be a major international financial hub, but its Islamic finance industry remains very much a work in progress. Key industry stakeholders have been observing increased interest and demand for Islamic financial products over the last year from both the Muslim and non-Muslim communities. This can be attributed to the population’s higher disposable income and personal finance literacy advocacy efforts by the government and private sectors. However, the retail market is still missing shariah-compliant mortgage facilities and insurance products, on top of the limited shariah-compliant investment options and vehicles.
The core impediment to the industry’s progress is the need to increase Islamic finance awareness at the consumer level in order to organically foster robust retail demand to support the introduction of new products and spur MAS to formulate and integrate Islamic finance into Singapore’s Financial Services Transformation Map. Table 1 summarises the key developments in the Islamic finance industry in Singapore.
Table 1: Islamic finance industry developments in Singapore
| Statutory Board | Monetary Authority of Singapore (MAS) | · MAS updated its guidelines on the application of banking regulations to Islamic banking in July 2022. The updated guidelines apply to all Singaporean financial organisations that offer Islamic banking.
· The guidelines aim to clarify the MAS policy on Islamic banking by describing the regulatory treatment of specific Islamic structures. It also outlines the MAS’s general approach to regulating Islamic banking, including the admission framework for financial institutions intending to offer Islamic financial services and the regulatory treatment for Islamic banking products, including the capital treatment for such products. |
| Islamic Religious Council of Singapore (MUIS) | · MUIS has grown its waqf (Islamic endowment) assets from S$150 million in 2000 to more than S$900 million in 2022, distributing more than S$4 million in waqf income in 2021. Also among the council’s significant initiatives is the Singapore Community Waqf (Wakaf Masyarakat Singapura), announced in 2020 and meant to fund the Singapore Muslim community’s long-term needs sustainably.
· These needs are areas of religious teachers’ development, religious institutions, and community initiatives. The fund’s advisory committee formed last year, presented critical areas for the fund to succeed, including building an ecosystem for inclusive community participation. |
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| Islamic Asset Management | Maybank Islamic Singapore | · Maybank provided the Royal Group of Companies the world’s first Islamic Green Finance in the hospitality sector worth S$250 million, of which has yielded them the following honours from The Asset Triple A Islamic Finance Awards 2022 and ABF Corporate & Investment Banking Awards 2022:
1. Best Green Loan Award in the Category of Best in Sustainable Finance 2. Best Green Loan Award in the Category for Best Deals by Country-Singapore 3. The Green Islamic Deal of the Year · Maybank launched Singapore’s first Shariah-compliant balanced fund, named Maybank Asian Growth and Income – Islamic Fund. The Fund offers investors a diverse portfolio of Shariah-compliant Asian equities, worldwide Sukuks, and gold ETFs. |
| FAiWA | · The Montreux Healthcare Fund (MHF), registered under the MAS’ restricted scheme and is available for accredited investors, has performed well relative to the broader market. The fund reported a return of +3% YTD to Sept 2022 despite a challenging investment environment where stocks and bonds have lost considerable ground this year. | |
| Franklin Templeton | · Franklin Templeton added a third shariah fund for retail investors to its suite of Islamic funds offerings, named the Franklin Templeton Shariah Technology fund. | |
| IdealRatings | · FTSE launched a co-branded FTSE-IdealRatings Islamic Index series in July 2022.
· The Index series encompass global, regional, and single-country indices, and is available for licensed fund managers for benchmarking and investment purposes. |
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| CGS-CIMB | · Launched the first Shariah-compliant trading account in Singapore (iCash) designed for Islamic socially responsible investors in mind.
· Awarded “Best Broker” by The Asset, FinanceAsia, Alpha SEA, and Securities Investors Association Singapore. |
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| Muslim-friendly Financial Consultant | TAQWA | · A group of Muslim financial advisors in Singapore, under AIA Singapore, is on track to win its third Top Team in AIA in a row, beating out 200 other groups.
· They have also trained the most Million Dollar Round Table (MDRT) consultants, which is the finance industry’s most prestigious award. |
| Ascent Islamic | · Ascent Islamic has assisted more than 3,000 Muslim families on their financial planning, started an in-house wasiat (Islamic will) writing service, and conducted Islamic estate planning classes at local mosques. | |
| Islamic Finance Community | Islamic Finance Singapore Ltd (IFSG) | · IFSG, a community-focused organisation, has recently received the company registration status, allowing it to perform more Islamic finance initiatives.
· Since then, it has delivered three Core Foundations to Islamic Finance, became the AAOIFI examination centre in Singapore, and published an Islamic finance Singapore directory. |
Source: Author’s own.
Despite the slow progress of its Islamic finance industry, Singapore is performing relatively well in terms of the “Halal Economy”, according to the State of the Global Islamic Economy Report for the year 2022 by Dinar Standard—climbing eight positions from 2021 to seventh place in 2022.
This was primarily due to the increase in modest fashion, media and recreation, pharmaceuticals, and cosmetics exports to OIC nations. Additionally, Singapore scored well on the awareness sub-indicator, as numerous educational courses and events were held across all sectors.
2023 PREVIEW – MUCH CAN BE DONE
The potential for Singapore to promote and support Islamic financial and banking operations is generally recognised for its global financial hub status, despite the country’s relatively modest size of the Islamic finance industry. Furthermore, being located between three of the world’s foremost centres in Islamic banking and finance (Indonesia, Malaysia, and Brunei), the opportunities to serve an estimated 300 million Muslim population are enormous, along with the additional Muslim market from Middle East, the US and Europe.
Moreover, amidst the bleak backdrop of inflation and recession, 2023 is anticipated to be much more exciting than 2022 for the Singapore Islamic finance industry. Among the developments expected are the following:
- A hedge fund entity offering a shariah-compliant alternative to its existing fund
- An updated shariah-screening methodology for stocks
- The operational commencement of the Singapore community Waqf (Wakaf Masyarakat Singapura)
- The launch of more shariah-compliant products
While further developments are anticipated in the upcoming year, the details currently remain behind the scenes. However, much of the developments expected are ground-up initiatives and innovations, which appear to address specific needs and opportunities of Singapore’s Islamic finance stakeholders. This includes (but is not limited to):
- Structural transformation on the industry level and coordinated efforts by market participants.
- Provision of structured Islamic finance educational programs for the community and professionals.
- Utilization of CPF (Central Provident Fund – local pension scheme) funds for Islamic home financing and Islamic investment products.
- The offering of shariah-compliant green, ESG, or SDGs (sustainable development goals) financial products and investment portfolios.
- Re-introduction of robust takaful products.
CONCLUSION
The year 2022 has been a fascinating development for the Singapore economy, not just as the preferred destination for conventional funds but also for its promising progress in the overall Islamic economy (halal-driven growth).
Despite the grim global outlook, opportunities abound for Islamic finance, especially in the FinTech and ESG space. However, more coordinated efforts must be made for the Singapore Islamic finance industry to stand as tall as its neighbours. The salient key to spurring much-needed progress and unlocking its potential is a structural transformation at the industry level, aided by MAS regulation support and coordinated efforts to increase consumer awareness of Islamic finance.
