SINGAPORE is well-poised to become a global hub for offshore Islamic wealth within the next five years, with increasing investment interest in Islamic finance products and services, said industry players at Maybank’s Invest Asean 2023 conference on Wednesday (Jun 21).

At the event, panellists from wealth management, Islamic finance and trust companies observed that Islamic wealth assets are growing at the same pace as conventional wealth.

In particular, offshore Islamic wealth is growing, offering great opportunities for financial players in South-east Asia, they said.

Maybank Singapore group head of wealth management and community financial services Alvin Lee said global financial data showed that the world economy’s centre of gravity is shifting from the western hemisphere to the Asia-Pacific.

Asia-Pacific accounts for 30 per cent of global high-net-worth individuals’ (HNWIs) wealth, with rising middle-class wealth also supporting the region’s wealth growth, he said. In South-east Asia itself, there is a similar trend of growing wealth from HNWIs and the middle income.

Meanwhile, global investor attention has shifted to alternative and purpose-driven investments such as sustainable investments, digital assets and Islamic wealth.

A NEWSLETTER FOR YOU

Friday, 8.30 am

Asean Business

Business insights centering on South-east Asia's fast-growing economies.

Sign Up

Around 20 per cent to 30 per cent of Islamic wealth is kept offshore, mainly in the United States, the United Kingdom and Switzerland, said Lee. Although Asia’s share of this remains relatively small, it has attracted global investor interest.

Muhd Ramadhan Fitri, Maybank Islamic’s director of Islamic Finance Strategic Programme, said that Islamic finance has attracted interest globally, as investors are drawn to its ethical and responsible investing dynamics.

Young, affluent Muslims are the key driver of the Islamic finance industry in South-east Asia, he added. “They are aware of the importance of ethical investing and environment, social and governance (ESG) principles, which already long existed even before ESG.”

He noted that Islamic wealth management has enjoyed steady growth, even during the Covid-19 pandemic. The compound annual growth rate for Islamic financial assets was 9 per cent from 2016 to 2021, according to BCG Analysis.

Islamic wealth is estimated at US$11.2 trillion across the top 10 Islamic banking asset jurisdictions, according to Credit Suisse’s Global Wealth Databook 2022, he noted. It is concentrated in Indonesia (US$3 trillion), Iran (US$2.3 trillion) and Saudi Arabia (US$2 trillion).

“Indonesia’s robust economic growth, rapid urbanisation and booming small and medium enterprises have driven the growth of Islamic wealth. This makes Indonesia a promising market for wealth management,” he added.

Singapore is the most preferred offshore financial centre among HNWIs from Indonesia and Malaysia, chosen by 32 per cent and 28 per cent respectively, according to BCG’s Global Wealth Managers Survey in 2021.

In Indonesia, it was followed by China (29 per cent), the US (7 per cent), Malaysia (5 per cent) and Thailand (3 per cent). In Malaysia, other choices were China (7 per cent), Japan (6 per cent), Indonesia (6 per cent) and Italy (5 per cent).

There is potential for Islamic finance players to explore a “cradle to grave” approach, suggested Dr Muhd Ramadhan. They can offer full-fledged financial services and products, from investment and wealth accumulation to legacy planning.

From the perspective of an affluent Muslim, Singapore is an undisputed hub for Islamic wealth for its leading financial status in Asia-Pacific, he said.

In pursuing global investors, Singapore’s main competitor is Hong Kong, said British and Malayan group chief executive officer David Koay. Both share similarities such as a robust economy, easy access to various financial markets, and good infrastructure and ecosystems.

Nevertheless, Singapore stands out for another key reason: family.

“There are an increasing number of investors from Thailand and Indonesia looking at setting up a trust or family office in Singapore, mainly because they want to be with their families as most of their family members are staying or studying in Singapore,” he added.

Besides family reasons, Singapore’s mature ecosystem – with immediate support available from consultants as well as legal and tax experts – is another advantage in the region, he said.