Islamic finance has long been the financial lifeline of a few Muslim-majority nations. But now, the spotlight is shifting—and Singapore is stepping up as a serious contender in this growing market. Standard Chartered’s latest report reveals why the Lion City is becoming an attractive alternative hub for Islamic banking beyond the traditional strongholds.
The global Islamic finance sector, once a niche concept in the 1970s, has ballooned into a multi-trillion-dollar industry. By 2024, assets under Islamic finance have soared to $5.5 trillion, with expectations to hit a staggering $7.5 trillion by 2028. Despite the impressive growth, 80% of these assets are still locked within five key markets: Iran, Saudi Arabia, Malaysia, the UAE, and Kuwait. But Standard Chartered’s analysis suggests this landscape is starting to shift — and Singapore is poised to claim its spot at the table.
Why Singapore?
Singapore’s rise is more than just hype. According to the report, its strategic move into Islamic finance was marked by a landmark deal: the city’s transaction banking team closed its first Islamic trade transaction with Saudi National Bank. This involved a Shariah-compliant USD liquidity arrangement using a metal-based Commodity Murabaha contract—a clever Islamic financing structure where buyer and seller agree upfront on cost plus a markup, aligning with Islamic principles.
This deal signals a broader trend. Singapore offers benefits that lure global corporates looking for Islamic finance options. Its low cost of funds stands out, making it more attractive than some traditional hubs. Add to that Singapore’s strong sovereign credit ratings and easy access to a diverse investor base, and you get a recipe for a burgeoning Islamic finance center.
Emerging Market Drivers
Two big factors are fueling this growth. First, regulatory developments. Countries like Saudi Arabia and Malaysia continue to refine their frameworks to support Islamic finance, making the environment friendlier for both investors and institutions.
Second, market expansion. As demand grows beyond traditional Muslim-majority countries, regions such as Southeast Asia and even non-Muslim majority financial hubs are embracing Islamic finance products. Singapore is capitalizing on this, positioning itself as a gateway for the Asia-Pacific region.
A look at the numbers gives a clearer picture:
| Year | Global Islamic Finance Assets ($ Trillion) | Projected Growth (%) |
|---|---|---|
| 2024 | 5.5 | — |
| 2028 | 7.5 | 36% |
With this kind of growth, diversification is the name of the game. Expanding beyond the old guard markets is critical to the industry’s long-term success.
Challenges and Opportunities
That said, the industry still faces challenges. Regulatory complexity varies widely by region. Plus, Islamic finance products require strict adherence to Shariah law, which isn’t always straightforward to implement consistently across markets.
But these hurdles also present opportunities. Singapore’s transparent legal framework and global financial ties help it navigate these issues better than many others. Corporates and investors alike can find more certainty here, making the city an attractive destination for Islamic finance innovation.
Why does this matter? Islamic banking isn’t just for the Muslim world anymore. It’s attracting a wider audience seeking ethical and alternative financing options. Singapore’s push signals a new chapter where Islamic finance could go mainstream in global financial centers that weren’t traditionally part of the scene.
The Road Ahead
Standard Chartered’s report hints that the future will belong to markets nimble enough to evolve and scale. Singapore, with its stable economy, innovative mindset, and strategic geographic location, ticks many boxes. It’s not just playing catch-up—it’s aiming to lead.
In a sector growing as fast as Islamic finance, missing out isn’t an option. Singapore’s rise shows how finance can adapt and thrive by embracing diversity and meeting new market needs head-on. The next few years will be fascinating to watch.
