From Niche to Nexus: Singapore's Rise in Islamic Finance

Although Islamic finance remains deeply rooted in Muslim-majority economies, global financial centers like Singapore are playing an increasingly pivotal role in facilitating cross-border transactions, ESG-aligned investments, and fintech-driven financial inclusion. By the end of 2024, Shariah-compliant assets managed in Singapore had reached approximately US$27.4 billion, supported by product innovation and growing investor confidence.

The city-state's regulatory clarity, tax neutrality, and active participation in international standard-setting bodies such as the IFSB and AAOIFI have positioned it as a preferred conduit for Gulf capital entering ASEAN markets. In early 2025, Singapore ranked 4th globally in the Global Financial Centres Index(GFCI 37), reflecting its continued prominence in global finance.

Enabling Architecture: Regulatory Foundations for Growth

The Monetary Authority of Singapore (MAS) has developed a facilitative policy framework that removes structural disadvantages historically faced by Islamic financial products. Key measures include:

Tax neutrality for sukukand Islamic leasing instruments

Exemptions on double stamp dutiesfor asset-based transactions

Equal treatment of Islamic structuresunder the existing regulatory regime

This proactive stance allows Islamic finance institutions to operate on a level playing field with their conventional counterparts, encouraging product innovation and international deal structuring.

Key Growth Vectors Shaping Singapore's Islamic Finance Landscape

1. Cross-Border Sukuk and Infrastructure Financing

With global sukuk issuance reaching US$170 billion in 2024, Singapore is carving out a niche as a listing and structuring center. A notable example includes the SGX listing of a US$250 million sukuk by a UAE-based infrastructure company. Legal certainty, streamlined listing procedures, and a strong investor base make Singapore attractive for issuers seeking global visibility.

2. Islamic Fintech and SME Access

Platforms like Kapital Boostexemplify the digital potential of halal finance. Islamic fintech transaction volumes are forecast to reach US$179 billion globally by 2026. Singapore's regulatory sandbox and open banking architecture offer fertile ground for innovation in Shariah-compliant digital lending, e-wallets, and micro-investments.

3. Shariah-Compliant ESG Investing

Singapore's Sustainable Bond Grant Scheme and green finance roadmap align well with the ethical foundations of Islamic finance. In Q1 2024, global sustainable sukuk issuance hit a record US$13.4 billion. Singapore is strategically positioned to lead in the creation of Shariah-compliant ESG funds and sustainability-linked sukuk.

4. Wealth Management for High-Net-Worth Muslims

Singapore offers robust wealth management services catering to Muslim clients from ASEAN, the Gulf, and North Africa. Its legal stability, discretionary trust structures, and fund passporting regimes are drawing family offices and Shariah-compliant portfolio managers seeking regulatory certainty and asset protection.

5. Cross-Jurisdictional Partnerships and Market Access

Collaborative frameworks with the Dubai International Financial Centre (DIFC) and Qatar Financial Centre (QFC) enhance Singapore's reach. These partnerships facilitate dual listings, reciprocal licensing, and streamlined investor onboarding—essential elements for global Islamic asset mobility.

6. Human Capital and Academic Infrastructure

Set to open in 2028, the Singapore College of Islamic Studies (SCIS), developed in collaboration with Al-Azhar University, will help fill the talent gap in Islamic jurisprudence and finance. Simultaneously, institutions like the Asian Institute of Digital Finance (AIDF) are incubating the next generation of Islamic fintech talent.

Structural Constraints: Why Singapore Still Trails the Leaders

Despite strong foundations, Singapore lags behind Islamic finance giants such as Malaysia, Saudi Arabia, and the UAE in scale. Key limiting factors include:

A relatively small domestic Muslim population (15.6%), which limits local retail demand

Absence of dedicated Islamic banksand a reliance on “Islamic windows” within conventional institutions

Lack of regular sovereign sukuk issuance, unlike in Malaysia where government bonds anchor a deep domestic Islamic capital market

A decentralized Shariah governance model, which may lead to inconsistent product approval across institutions

While Malaysia benefits from a centralized oversight framework via Bank Negara Malaysia and INCEIF (its Islamic finance university), Singapore's model emphasizes institutional flexibility—potentially affecting investor confidence in standardization.

Strategic Outlook: From Scale to Sophistication

Singapore is not seeking to replicate the domestic scale of traditional Islamic finance leaders. Instead, it aims to provide the infrastructure, legal certainty, and innovation capacityto act as a global facilitator. Its core value lies in bridging capital from the Gulf with projects and opportunities across ASEAN.

In an era defined by ESG convergence, digital transformation, and growing demand for ethical finance, Singapore's strengths in regulatory transparency, fintech enablement, and cross-border collaboration make it a vital player in the next chapter of Islamic finance.