The MAS has said the jurisdiction has already developed robust business through raising of Shariah finance and will continue to build expertise and infrastructure in this market.

Singapore plans to develop its Islamic finance regime to capture investment links with Gulf Co-operation Council nations and the wider Middle East, its central bank and regulator says. The Asian city-state has chalked up eight issuances of sukuk debt totalling S$600 million ($442 million) since launching this capability.

Jacqueline Loh, deputy managing director of the Monetary Authority of Singapore, spelled out what she sees as Singapore’s progress in working in the field of Islamic finance at a recent conference on the matter.

MAS established a sukuk facility in 2009 (sukuk is a type of debt that fits with Shariah law) to provide Singapore dollar-denominated Islamic regulatory assets for banks undertaking Islamic finance activities.

“Going forward, we will continue to strengthen our Islamic finance regime and capabilities to enable us to support opportunities from deepening trade and investment linkages between Asia and the Middle East, as well as infrastructure projects within the Asian region," said Loh.

"In infrastructure for example, an estimated $60 billion will be needed annually until 2022 to meet the basic infrastructure needs in ASEAN alone. The asset-backed nature of Islamic finance makes sukuk ideal for financing of infrastructure projects and would complement ongoing work by Singapore to enhance the bankability of infrastructure projects in the region and involve more capital market participants,” Loh added.

Islamic finance, which bans the charging of interest on loans as well as activities deemed to be gambling, for example, typically involves asset-backed forms of financing, with real estate and commodities important aspects as a result. The sector, while still overshadowed by conventional forms of finance, has grown as a result of the rising affluence of oil-producing countries with large Muslim populations, and to some extent by Muslims living in Western nations.

One potential stumbling block has been a lack of clear global standards for Islamic finance, because different jurisdictions can and have adopted differing treatments on transactions due to varying interpretations of Shariah law.

Loh said the MAS is working with the industry and other government agencies to provide “clarity and certainty in the regulatory and tax treatment for sukuk”. 

“For example, some industry players have suggested that pre-approved standardised templates for common sukuk structures could be introduced to expedite issuance,” she said. 

Loh said Singapore Management University’s International Islamic Law and Finance Initiative, now in its sixth year, seeks to carry out research and develop thought leadership in Islamic law and finance, in collaboration with institutions in the UK, Malaysia and Indonesia. SMU also offers a Masters in Islamic Law and Finance, and will be graduating its third cohort of students this year.

In addition, Islamic finance has also been included as an eligible subject area under MAS’s Finance Scholarship Programme, she added.