Singapore has an enormous population of diverse cultures living together in one of the world’s best cities. This means that Singaporean industries must have their products and services cater to a wide scope of cultures, ideas, and beliefs. In this case, Singapore’s financial sector must accommodate both Islamic and non-Islamic investing systems and values. Know more on how to start investing in Singapore here.
Currently, 15.6% of Singapore’s population practice the Islamic faith. Therefore, many Halal investors reside and work with Singapore’s financial industry. With this fact in mind, Halal investors can be sure that they can find Islamic faith-compliant investments in Singapore.
However, for those outside or new to the Islamic principles of finance, here’s an excellent guide that introduces you to how Islamic finance works, finding Shariah-compliant Asian stocks, and more.
What’s The Islamic Perspective on Finance?
The Islamic perspective on finance is a code of conduct in which the principles of Sharia govern all aspects of activities. The basic idea is that all aspects of economic activity are to be focused on seeking the material well-being of all people, not just the individual.
To Shariah law, interest rates are illegal because they are seen as predatory. Islamic law also views the economic system as based on profit and loss sharing between two parties, not just borrowers.
What Does ‘Halal Investing’ Mean in Islamic Finance?
The Islamic term “Halal” means “permissible” in Arabic. From an Islamic perspective, Halal investing is investing in equity that complies with Sharia law.
Examples of Halal investments include:
- Companies that provide goods and services to Muslim consumers
- Companies that produce goods and services in accordance with the provisions of Sharia law
- Equity investments in U.S. companies that are traded on the major exchanges
Non-Halal investment examples are:
- Interest payments or receiving a share of future profits in exchange for lending money
- Buying companies which engage in activities that are forbidden by Sharia law. For example, a company that distributes alcohol or pork products.
Here’s an easy-to-understand guide to differentiate Islamic and traditional Western-style investing:
|Islamic investments||Traditional investments|
|Cannot invest in trades or business activities that violate Islamic law.
These include alcohol, gambling, pornography, tobacco, weapons and armaments, pork and pork products, and using/working with interest-based financial services like moneylenders
|No restrictions on trades or business activities|
|Cannot invest based on principles of uncertainty or gambling. This disqualifies Halal investors from riding on options and commercial insurance||Can invest in options, futures, and commercial insurance|
|Social and moral value-based investing||May include unethical sources of revenue or returns, such as higher interest rates, but operates under regulation by the government.|
|Investments have to satisfy a strict criteria before it becomes halal||Need only satisfy prevailing financial laws|
Are There Halal Investing Opportunities in Singapore?
Now that we’ve defined Halal investing, we can say that many broader global equity index funds are disallowed by its value system. However, it doesn’t mean you can’t take an active asset management approach in your investing portfolio.
We have a list of Islamic fund indexes that your local islamic religious council would agree with you to meet its minimum investment sum.
1. Maybank Asian Growth and Income
The Maybank Asian Growth and Income index is a diversified and balanced equity fund that invests in well-managed companies in the emerging Asian region. It is a conservative option for investors looking to invest in the region without taking too large of a risk. The index is composed of companies from Japan, Australia, South Korea, Taiwan, Singapore, Indonesia, Malaysia, Hong Kong and India.
The index invests in companies from both emerging and developed Asian countries selected based on their growth potential. The Maybank Asian Growth and Income index is compatible with Islamic law as it does not hold any interest-bearing debt securities.
2. FTSE SGX Shariah Index Series
The FTSE SGX Shariah Index Series is a family of indices designed to accurately represent the Singapore equity market’s performance. The FTSE Shariah Index Series are based on transparent, rules-based methodologies that meet Shariah law requirements.
The Shariah Index Series comprises the FTSE SGX Shariah All-Cap Index, FTSE SGX Shariah Large-Cap Index, and FTSE SGX Shariah Mid-Cap index, among others.
The FTSE SGX Shariah Index Series is a benchmark for Islamic investors. The index is designed to measure the performance of companies in the global Islamic economy. The index excludes interest and alcohol production and is screened for other parameters such as tobacco, gambling, defense, tobacco, pork, and pornography.
3. Wahed FTSE USA Shariah
The risk-adjusted performance of the FTSE USA Shariah Index produced a Shariah compliant return of 8.1% over one year, while the S&P 500 delivered a nominal return of 12.9%. This Islamic index outperformed the S&P 500 by a substantial margin.
The FTSE USA Shariah Index excludes firms engaged in activities deemed to be strictly prohibited in Islam such as tobacco, gambling, and alcohol.
4. HSBC Global Islamic Equity Index Fund
The HSBC Global Islamic Equity Index Fund is a global equity fund that invests in large and medium-sized companies incorporated in any of the Muslim-majority countries and comply with one or more of the principles of Islamic law. These principles include avoiding gambling, alcohol, pornography, tobacco, pork products, weapons manufacturing and other industries.
How To Find Islamic Investments in Singapore
We know that there are much more Halal investing opportunities in Singapore. However, modern investing tools, such as Robo Advisors, can help you find them faster. Many Shariah-focused investment indexes can give you great potential monthly dividend payout without violating religious laws.
1. Robo Advisors
A robo advisor is a type of online financial advisor that uses algorithms to determine the best investments for you based on your risk tolerance and goals. They are considered a form of artificial intelligence and require no human intervention to manage your money.
Many robo advisors offer direct indexing, which is an investment strategy where the robo advisor invests without any human involvement.
It’s possible to set robo advisors to invest in Shariah-compliant indexes only, helping you avoid morally-deterring investments while benefiting from robo advisor algorithms
2. Shariah-Compliant Indexes
Shariah-Compliant Indexes are financial indexes that are designed in order to comply with Islamic law. This means that the companies that comprise the index cannot be involved in certain industries, such as alcohol, pornography, pork, or interest-based lending.
The index must also be made up of companies primarily based in countries predominantly Muslim, such as Egypt, Saudi Arabia, Malaysia, Indonesia, Pakistan, and Turkey. Singapore has its excellent selection of Shariah-compliant indexes above.
FAQs to Learn More About Islamic Investments
1. How Can I Invest in Singapore Halal Investments?
You can invest in Halal indexes and assets by using any broker that includes the assets you currently have. Most online brokerages, including robo advisors, aren’t strictly Shariah-compliant. However, all the non-automated investments you make should comply with Islamic law because intent is always crucial in any Halal investment.
2. What Is The Best Halal Investment?
Halal investments meet the criteria of Islamic law and exclude those that may violate Islamic principles. Shariah indexes exclude companies engaged in tobacco, alcohol, gambling, pork production, and other similar industries. Thus, any index that complies with Shariah law is already an excellent one.
It’s challenging to identify the best Halal investment opportunity because each one is unique and beneficial, so we highly recommend checking out this starter list of broad indexes that comply with Shariah law.
3. Is Wealthsimple Halal Really Halal?
Wealthsimple Halal is a Sharia-compliant investment service that offers a high-quality stocks, bonds, and cash portfolio. Wealthsimple Halal consults Shariah scholars to avoid investing in companies that do not comply with Shariah law or profit from loan interest rates.
In order for an investment to comply with Sharia Law it must be 100% Halal, which means that it complies with Islamic law and regulations. Thus, according to its terms and conditions, Wealthsimple Halal is truly halal.
4. Are All Robo Advisors Halal?
Robo advisors automatically use your risk preferences and use its algorithms to help you find the best assets that can grow your cash. However, all of them aren’t Halal. You’ll still find Haram assets and indexes, which is why you’ll need to have an active approach to using robo advisors and popular Singapore online and traditional brokers.
Our Final Thoughts
Many Islamic practitioners in Singapore can find many Halal investments using robo advisors, online and traditional brokers. To find success in doing so, they’ll need to be active in managing their assets by understanding the fundamentals of Shariah law when it comes to making investments.
- Islamic law prohibits investors from buying companies which engage in activities that are forbidden by Sharia law. For example, a company that distributes alcohol or pork products.
- All brokers in Singapore, including robo advisors, can offer Halal investment opportunities. However, they require Islamic investors to take on an active role to do so.
- Many indexes in the market comply with Shariah law, making Halal investment lucrative for Islams in Singapore.
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