What is halal investment? A guide to Singapore's buzzing Islamic finance scene

As the financial hub of Southeast Asia, Singapore's constantly making strides in different arenas-for one thing, did you know we're ranked the best business environment in the world again, for the 15th consecutive year?

But today in this article, our eyes are on Halal investing. Singapore is steadily carving a niche as an Islamic investment powerhouse. With a robust regulatory framework that embraces Islamic banking and finance, the nation witnessed a remarkable 22 per cent surge in Islamic investments from 2010 to 2022.

Industry mavens peg the Islamic assets under management in Singapore at an impressive USD 4.37 billion. Over a third of these assets find their home in the 15 banks that offer Shariah-compliant banking options. For those pondering over faith-based investments in the heart of Asia, Singapore might just be your next halal financial haven.

At its core, Halal investing is more than just a financial decision. It's a faith-driven commitment. Let's take a closer look at what it means, how it's regulated, Halal investment options, and more.

Understanding Halal investments

Halal investing isn't just about the green notes in your wallet. It's about the moral code in your heart. Rooted in Islamic law or Shariah, this faith-based approach to investment is as much about the soul as it is about the stock market.

Principles of Halal investing

1. Prohibition of Riba (Interest): The very foundation of Halal investing rests on shunning riba, or interest, which is considered exploitative in Islamic teachings.
2. Avoidance of Haram (Forbidden) Industries: This principle is clear-cut. If a company dabbles in alcohol, gambling, or tobacco, it's off the Halal investment list.
3. Steering Clear of Haram Practices: Beyond just products, Halal investing also distances itself from businesses that indulge in forbidden practices, such as charging interest.
4. Ethical and Socially Responsible Investing: It's not just about avoiding the bad; it's also about embracing the good. Halal investing champions businesses that leave a positive mark on society, be it through sustainable practices, community upliftment, or upholding human rights.
5. Low-Risk, High Morality: While all investments come with a degree of risk, Halal investing leans towards options that don't benefit from or fund unlawful industries or products.

Sharia-Compliant investment vehicles

When it comes to investment vehicles that align with Islamic principles, the financial world has crafted a suite of options that resonate with the tenets of Shariah law. These aren't your run-of-the-mill investment funds. They're tailored to meet the specific requirements of the Islamic faith.

1. Shariah-Compliant Funds: These funds epitomise socially responsible investing with an Islamic lens. They avoid industries like alcohol and gambling, focusing instead on areas like real estate and ETFs that resonate with Islamic values.
2. Sukuk: Often dubbed the Islamic counterpart to bonds, Sukuk offers investors a slice of the profits from underlying assets, sidestepping the interest taboo in Islamic law.
3. Islamic Equity Funds: These funds are all about stocks and mutual funds that pass the Shariah litmus test. With a strict no-entry policy for companies involved in haram activities, these funds employ rigorous Shariah screening for their equity choices.
4. Shariah-Compliant REITs: Real estate is a popular investment avenue in the Islamic world, and Shariah-compliant REITs offer a way to dive into this sector. These trusts invest in real estate assets that don't just generate profits but also comply with Islamic principles, especially when it comes to financing.

How is it different from mainstream investing?

Ever wondered how Halal investing stacks up against its mainstream counterpart? Truthfully, each model has its unique flavour. Both Halal and mainstream investing dance to the same fundamental tunes of risk assessment, asset allocation, and diversification. It's a reminder that while the paths may vary, the underlying journey of smart investing remains universal.

1. Religious Roots: At the heart of Halal investing lies a deep commitment to Islamic law and principles. Mainstream investing, on the other hand, operates without any religious compass.
2. Dodging the Taboos: While Halal investors steer clear of companies dabbling in alcohol, gambling, or tobacco, mainstream investors don't bat an eyelid. It's all fair game in the conventional arena.
3. Moral High Ground: Halal investing isn't just about the money; it's about making a difference. There's a strong push towards businesses that better society, be it through sustainability, community upliftment, or human rights advocacy. Mainstream investing, while not devoid of ethical options, doesn't always make it a priority.
4. Risk Appetite: Halal investing leans towards the safer side, avoiding any ventures that might indirectly support unlawful industries. Mainstream investing? It's a bit more adventurous, often flirting with higher-risk avenues.
5. Vehicles of Choice: When it comes to investment vehicles, Halal investors have a distinct lineup, from Shariah-compliant funds to Islamic REITs. Mainstream investors, meanwhile, have a broader highway with a myriad of options to cruise on.

Halal investment vs. mainstream investment: A comparative look

Wer provided a clear snapshot of the distinctions between Halal and mainstream investing, highlighting the unique characteristics and priorities of each approach. Whether you're guided by faith, financial goals, or both; understanding these differences can help inform your investment decisions.

Halal investment in Singapore

With Singapore positioned to become a "global hub for offshore Islamic wealth within the next 5 years", the city-state seamlessly blends Islamic principles with financial prowess.

As we venture further, we'll unpack Singapore's regulatory framework and spotlight the prime avenues for Halal investment.

Regulatory framework in Singapore

Singapore's financial landscape boasts a robust legal and regulatory framework for Islamic banking and finance, encompassing the realm of halal investing. Here's a closer look at the pillars that uphold this structure:

Majlis Ugama Islam Singapore (MUIS)

Serving the country's minority Muslim population, MUIS stands as the beacon of halal certification in Singapore. Beyond just food and services, MUIS extends its halal certification to investment products, ensuring they align with Islamic principles.

Monetary Authority of Singapore (MAS)

A pivotal player in the financial arena, MAS oversees the regulation of Islamic banking, finance, and by extension, halal investing in Singapore. Here's a snapshot of MAS' role:

1. Regulatory Approach: MAS takes a flexible approach to Islamic banking, mirroring conventional banking regulations but with a light touch on Shariah matters. They provide broad guidelines on Shariah governance and specific directives for institutions offering Islamic financial services, including halal investing.
2. Capital Treatment: MAS views Sharia-compliant products on par with conventional ones. Sukuk, for instance, qualifies as assets for capital and liquidity calculations and is accepted as collateral for MAS's liquidity access.
3. Evolving Framework: The world of Islamic banking and finance is dynamic, with new structures emerging over time. MAS recognises this fluidity and commits to refining its regulatory framework. Periodic reviews ensure that the guidelines remain relevant, adapting to the ever-evolving landscape of Islamic finance.

Halal investment options in Singapore

With institutions like MUIS and MAS at the helm, Singapore's halal investing scene is not just thriving but also operating under a well-defined and adaptive regulatory umbrella.

Banking and finance

Shariah-Compliant Funds

The Lion City boasts an array of Shariah-compliant funds. Notable mentions include the HSBC Insurance Ethical Global Sukuk Fund and the NTUC Income Takaful Fund. Here's a fun fact. Singapore's outstanding Sukuk issuances outshine any other conventional jurisdiction, peaking at a whopping US$2.71 billion in 2014.

Singapore's financial landscape isn't just about numbers; it's about values too. The Lion City's array of Shariah-compliant funds, like the HSBC Insurance Ethical Global Sukuk Fund and NTUC Income Takaful Fund, are more than just investment vehicles. They're a testament to socially responsible investing.

Guided by a Shariah board of scholars, these funds undergo rigorous annual audits to ensure they steer clear of controversial products/services like alcohol, gambling, and military equipment. Instead, they champion ethical investments and 'purifying' any prohibited income by channelling it to charity.

Islamic Equity Funds

Dipping your toes into the stock market? Islamic equity funds, such as the PRULink Islamic Global Equity Index Fund, are your go-to. These funds are meticulously crafted to follow Shariah law. While they invest in joint stock companies like their counterparts, they take a hard pass on firms profiting from prohibited activities.

Sukuk

Sukuk, often dubbed the Islamic counterpart to bonds, have carved a niche in Singapore with standouts like the Sime Darby Plantation Sukuk and Khazanah Nasional Sukuk. Here's what you don't know. Unlike traditional bonds, Sukuk are anchored in tangible assets. Think of it as holding a valuable, Shariah-compliant asset that benefits the public good.

Investment platforms

These are online platforms tailored specifically for Halal investors in Singapore with investment opportunities that adhere to Islamic principles, making it easier for investors to find and manage Sharia-compliant investments. Here are some of the prominent platforms to consider.

Wahed

Step into the digital age with Wahed, an online halal investing platform. With a clientele spanning over 150,000, it's a global force in Islamic robo-advisory.

Ethis

With roots in Malaysia and branches stretching to Indonesia and Oman, Ethis.co offers halal investment opportunities in Singapore's real estate projects.

SmartMamat

Consider SmartMamat your compass in the world of Muslim-friendly personal finance. From halal mutual funds to ETFs, it's a treasure trove of information. Remember, these platforms offer a smorgasbord of halal investment options. Still, it never hurts to practise due diligence. always ensure your investments are through certified platforms.

Real estate

Singapore's real estate sector isn't just about glitzy condos and sprawling malls; it's also a fertile ground for halal investments.

Warees

Warees isn't just another real estate platform. It's a custodian of Waqf assets in Singapore, with a staggering value of $769 million.

Shariah-Compliant REITs

Sabana Shariah-Compliant Industrial Real Estate Investment Trust and the Mapletree Industrial Trust, Shariah-compliant REITs offer lucrative investment opportunities.

Tips and resources for Halal investing in Singapore

To make it all the more simpler to navigate Halal investing, here are some guidelines and resources that can help you to familiarise with the local scene:

1. Opt for Shariah-compliant investment

From digital platforms like Ethis and Wahed Invest to FTSE SGX Shariah Index Series for stocks, and a treasure trove of funds like HSBC's Ethical Global Sukuk Fund, Singapore's investment landscape is brimming with Halal options tailored for the discerning investor.

Maybank's insurance arm, Etiqa Insurance Singapore, also recently launched Singapore's first Takaful (Shariah-compliant) offering in over a decade, Invest Future.

2. Consider Halal real estate investments

Warees provides investment opportunities in real estate projects in Singapore and manages significant Waqf assets. Not just any real estate platform, they're the custodians of Waqf assets in Singapore, a cool $769 million worth.

3. Communities to connect with

Islamic Finance Singapore (IFSG) is more than just a community, it's a hub for Muslim investors in Singapore. By merging the expertise of finance professionals with the wisdom of Shariah scholars, IFSG offers a comprehensive platform for all things related to Islamic finance and investment. Join their Telegram group to stay up to date on Islamic Finance happenings and connect with others in the community.

4. Events not to miss

Rizq Symposium 2025

• Jan 25, 2025
• 9 am – 550 pm
• Suntec Convention Centre, Singapore

The Rizq Symposium 2025, back for its third iteration, is an annual symposium on wealth management for Muslims. This year’s symposium invites international guests to touch on topics such as analysing stocks and sukuks, understanding the role REITs play in your investment income, getting the latest updates in the Islamic finance and investing industry, and more.

5. Follow influencers

Ronnie Faizal Tan

A force to be reckoned with in the Halal industry, Ronnie's journey spans from telecommunications to the global Halal marketplace. With accolades like being listed as the most viewed Founder on LinkedIn in Singapore and his role in Mustafa's Pte Ltd, he's an influencer worth following.

Umar Munshi

As the co-founder of Ethis Global, Umar is reshaping the landscape of ethical crowdfunding and Islamic finance. With platforms operating in multiple jurisdictions and a community of over 30,000 members, his insights are invaluable.

Junaid Wahedna

The brain behind Wahed Inc., Junaid's vision of ethical investment has garnered him over 300,000 customers worldwide. His approach to integrating technology with ethical investment principles makes him a standout figure in the Islamic fintech space.

The road ahead for Halal investment

Halal investing in Singapore is slowly but surely gaining momentum. With growing communities, events, and thought leaders in the space, there's a plethora of investment resources readily accessible for any interested individual.

This article was first published in MoneySmart.