GLUP 1083

INTRODUCTION TO ISLAMIC LAW

“Shariah Legal Framework in Singapore”

PREPARED BY:
ADLIANA RAZITA BINTI AZLAN (273396)
ANIS QISTINA AINI BT AHMAD ZAMIN (273807)
KH’NG HUI HONG (273410)
KOAY XIAN LIT (273677)
KOTHAI SUNTHRARAJU (273805)
NUR AMIRAH BINTI ROSLI (273008)
SITI RUQAIYAH MOHD JAMIL (273501)

PREPARED FOR:
DR. MOHD ZAKHIRI
Contents
ISLAMIC LEGAL SYSTEM IN SINGAPORE........................................................................4
The Constitution of Singapore...................................................................................................5
Court System in Singapore.........................................................................................................6
Supreme Court........................................................................................................................6
High Court..............................................................................................................................6
Court of Appeal......................................................................................................................6
State Courts............................................................................................................................7
District Courts........................................................................................................................7
Magistrate Courts...................................................................................................................7
Small Claims Tribunal............................................................................................................7
Community Court...................................................................................................................7
Coroner’s Court......................................................................................................................7
Regulator in Singapore...............................................................................................................8
Islamic Banking and Finance in Singapore..............................................................................10
Legal and Regulatory...........................................................................................................10
Position of Islamic Banking and Finance.............................................................................11
Sukuk and Islamic REITs.....................................................................................................12
Opportunities........................................................................................................................13

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Legal System of Singapore

Republic of Singapore is a country with diverse religion, culture and languages which is
located between Malaysia and Indonesia. In addition, Singapore is a Muslim minority country
unlike its neighbouring countries. The history of legal system in Singapore can be referred to
the time when Singapore was under the colonization of British. Although the British
government introduced English common law as the Singapore legal law system, it was still
influenced and adjusted to align with the Malay traditional law and Islamic customary law in
Malaysia and Indonesia hence providing a unique legal position for Muslim among
Singaporean as they had the exclusive right to invoke Islamic law for some matters of
personal cases such as marriages, ceremonies of religion and rules of inheritance as long as it
was not contradict with the reason, justice and humanity. The position of Islamic law took
over family matter can clearly be seen in the case of Hawah v. Daud, the earliest reported
judicial decision by which the Singaporean Courts chose to apply their understanding about
Islamic Law instead of applying the British common law. In this case, the Court of Judicature
of Prince of Wales Island, Singapore and Malacca held that the Muslim women was not
forced to follow her husband’s name but were allowed to use their own names upon marriage
and they were given the right to share the property during divorce.

The first enactment of 1880 Mohammad Marriage Ordinance was said to be the official
recognization of British colonial power towards the application of Islamic personal law such
as the the appointment of Islamic judges which is known as Quadis and the registration of
Muslim marriages and divorces among the Muslim community through legislation.

Although the Ordinance was repealed and replaced by the 1966 Administration of
Muslim Law Act (AMLA) based on the constitution of Singapore after they achieved
independence in 1965, a specific mode of integrating and applying Islamic law into the
Muslim community within the state was still be inherited. Some provisions of 1880
Mohammed Marriage Ordinance which were originally made by British were re-enacted
while some of the legislation had been revised and amended for several times by AMLA in
order to regulate the religious affairs of Muslim and the framework of applying Islamic Law
in Singapore based on new situation in Singapore. The AMLA that includes 10 parts and 146
sections has outlined the structure, authorities and power of the three keys Islamic institutions

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In Singapore which are Majlis Ugama Islam Singapore (MUIZ), the Registry of Muslim
Marriages (ROMM) and the Syariah court system.

The Constitution of Singapore

Singapore adopted the 1965 Constitution of the Republic of Singapore on December

1965 after they separated from the Federation of Malaya. This Constitution was largely based
on the 1963 State of Singapore. In the subsequent 50 years, the Constitution has been
amended many times in order to fulfill the needs of the community. It outlines the structure
and powers of the country’s executive and legislative branches of government. It consists of
165 Articles spreads over 14 Parts and 5 schedules.

The main religion in Singapore are Buddhism, Taoism, Christianity, Islam and
Hinduism. But majority of the residents practice Buddhism and Taoism (43.2%) while
residents who practices Islam consists of 14% of the population as of 2015. This makes
Singapore a country with no official state religion and therefore, a secular state. The
definition of secular state is where a country appears to be officially natural in matters of
religion and the country does not discriminate persons based on the citizen’s religion. Being a
secular state, the government will not interfere with any activities related to religion as long
as such activities are done without breaking the law. Article 15 elaborates the freedom of
religion where every person has the right to profess any religion and to spread the religion in
accordance with the law.

While, matters on Muslim religion is only mentioned under Article 153 of the
Constitution. In this article, it states that the lawmaker of Singapore may enact law on
Muslim religious affairs, and they may establish a Council to advise the President in matters
that link with Muslim religion.

Muslim religion

153.  The Legislature shall by law make provision for regulating Muslim religious
affairs and for constituting a Council to advise the President in matters relating to the
Muslim religion.

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Court System in Singapore
There are two tiers of court system in Singapore. The first tier which is a Supreme
Court. It is the highest judicial court in Singapore. Supreme Court consists of the High Court
and Court of Appeal. While for the second tier, is the State Courts. Previously, it is called as
the Surbodinate Courts. It administers justice among the people. District Court, Magistrates
Court, Small Claims Tribunal, Coroner’s Court and Community Court are among the courts
under the State Courts.

Supreme Court
1. High Court
High Court exercises its original and appellate jurisdiction in civil and criminal cases. It hears
the first instance cases as well as appeal cases from the State Courts. The court’s jurisdiction
in civil cases involve the cases where the claim exceeds S$ 250,000, probate matters if the
estate exceeds S$5,000,000, ancillary matters in family proceedings where assets equal
S$5,000,000 or more. While for the criminal cases, High court is empowered to try all the
cases. It tries all the cases involving the offences that are punishable by death or with
imprisonment terms exceeding 10 years. 1Apart from that, it also hears special cases
submitted by the District court or Magistrate Court. It has the power to reverse the decision
made by the State Courts or ask the State Courts to conduct a new trial on the matter.

2. Court of Appeal
Court of Appeal is the final appellate court and the highest court of the land. It hears the
appealed civil and criminal cases from the High Court. It exercises the appellate criminal and
civil jurisdiction. It is usually presided by three judges which are Chief Justice, Judge of
Appeal and a Judge of High Court. Certain appeals may be heard only by two judges.
However, if necessary, the Court of Appeal may comprise five or any greater uneven number
of Judges.

1
Singapore Judicial System. (July, 2019). Retrieved from https://www.supremecourt.gov.sg/about-us/the-
supreme-court/singapore-judicial-system

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State Courts
1. District Courts: In civil cases, District court hear the claims to recover monies for
debt, demand or damages up to S$250,000. While in criminal cases, it can try on the
offences where the maximum imprisonment term does not exceed 10 years or the
offences that are punishable with fine only which not exceeding $30,000 or the
offences that are punishable up to 12 strokes of the cane or any lawful sentence
combining any of the sentences.

2. Magistrate Courts: Compare to District Court, Magistrate Court has the jurisdiction
wider than the District Court. It can try the offences where the maximum
imprisonment term does not exceed 5 years or the offences which are punishable with
a fine only. It can sentence a person to imprisonment for not more than three years, a
fine not exceeding $10,000 and up to 6 strokes of the cane.

3. Small Claims Tribunal: Small Claims Tribunal handles small claim disputes. It offers
a faster and less costly process to the claims that up to S$10,000 or up to S$20,000
with written agreement from both parties. All claims must be filed within 1 year from
the date of the incident.

4. Community Court: Community Court deals with special cases involving the
community resources and criminal justice. It hears offences committed by persons
aged 16 to 18 or with mental disabilities, as well as other cases such as neighbourhood
disputes, family violence, cruelty to animals and those related to racial issues.

5. Coroner’s Court: It holds inquiries into cases where a person has died suddenly,
unnaturally, violently or in a way that cause of death is unknown and in situations
where the law requires an inquiry.

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Syariah Court
The Syariah court has the jurisdiction to hear and determine all actions and
proceedings in which the parties are Muslims or where the parties were married under the
provisions of the Muslim law. It also have the jurisdiction to hear the proceeding which
involve disputes relating to marriage, divorces known in the Muslim law as fasakh, cerai
taklik, khuluk and talak, betrothal, nullity of marriage or judicial separation, the disposition
or division of property on divorce or nullification of marriage or the payment of emas
kahwin, marriage expenses (hantaran belanja), maintenance and consolatory gifts or mutaah.
It also shall have power to inquire into and adjudicate upon claims by married women or
women who have been divorced for payment of her emas kahwin and marriage expenses.

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Regulator in Singapore

A regulator is a person or organization appointed by a government to regulate an area

of activity such as banking or industry. Regulatory authorities are commonly set up to
enforce safety and standards, and to protect consumers in markets. Responsible for exercising
autonomous authority over some area of human activity in a regulatory or supervisory
capacity. The regulator or the Monetary Authority of Singapore known as MAS is
Singapore’s central bank and financial regulatory authority. The Monetary Authority of
Singapore (MAS) is the sole bank regulator in Singapore. It is also the central bank of
Singapore. MAS is a body corporate established under the Monetary Authority of Singapore
Act (MAS Act). Sir Tharman Shanmugaratnam, 5th senior minister of the Singapore is the
chairman of the MAS.

The Monetary Authority of Singapore (MAS) was established in 1970 by act of

government, beginning operations as the country’s central bank, and financial regulatory
authority, on 1 January 1971. MAS is governed by a board of directors and chaired by
Singapore’s Minister of Finance. The MAS manages monetary policy through exchange rate
settings, rather than interest rates, letting the Singapore dollar rise or fall against the
currencies of its main trading partners within an undisclosed band. MAS has a broad prospect
of functions which plays an important role. It oversees all financial institutions in Singapore.

The MAS has been given powers to act as a banker to, and financial agent of, the
government. It has also been entrusted to promote monetary stability, and credit and
exchange policies conducive to the growth of the economy. According to its mandate,
MAS’ role as central bank involves conducting monetary policy, including
issuing currency and overseeing payment systems. MAS also manages
Singapore’s foreign reserves and assets. MAS has the exclusive right to issue
banknotes and coins in the Republic of Singapore. Their dimensions, designs and
denominations are determined by the Monetary Policy Committee with Government
approval. The banknotes and coins thus issued have the status of legal tender within the
country for all transactions, both public and private, without limitation.

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 However, unlike many other central banks such as Federal Reserve System or Bank of
England, MAS does not regulate the monetary system via interest rates to influence the
liquidity in the system. Instead, it chooses to do it via the foreign exchange mechanism. It
does so by intervening in the SGD market. In 2005, then Senior Minister Goh Chok Tong and
Chairman of the Monetary Authority of Singapore (“MAS”) expressed the government’s
desire to help develop the Islamic financial services industry in Singapore. On 2005,
Maybank introduced Shariah compliant online savings accounts and Shariah compliant
savings cum checking accounts. HSBC Insurance launched the Takaful Sinaran Fund. MAS
became a full member of IFSB.

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Islamic Banking and Finance in Singapore

Legal and Regulatory

The growth of Islamic finance and banking are encouraged and nurtured by the
desired number of South East Asian nations. The trend has likewise embraced by
Singapore.One of the first few Islamic equity funds in the world was launched by the
Mendaki Growth Fund (Amanah Saham Mendaki) in Singapore of May 1991. The statement
above makes Singapore as one of the pioneers of Islamic finance.

In 2005, The Monetary Authority of Singapore (MAS) chairman and the senior
minister, Goh Chok Tong, has expressed the government’s intention to assist the
development of Islamic financial services industry in Singapore.

One of the first steps taken by the MAS to aid the growth of Islamic finance in
Singapore include conducting a preliminary review of Singapore’s regulatory framework in
order to decide whether Singapore would need to establish a separate banking regulatory
framework for Islamic financial services or, like the United Kingdom, accommodate both
Islamic and conventional banking within a common regulatory framework. After consulting
with industry practitioners, the MAS decided that there was no need to create a separate
Islamic banking regulatory framework. Instead, MAS set about to fine tune the existing
framework of banking regulations and focus on levelling the playing field between islamic
and conventional financial services.

Singapore’s Islamic financial institution follows the legislation of the country’s

Banking Act similar to conventional institutions, with capital adequacies and requirements
applicable to Islamic banking products in the same manner as that of conventional banking.
The risk to the soundness of the country’s financial institution are one of the focuses of the
regulator as stated by MAS. The statement above comes with reviews in place of regulatory
and tax treatment to expedite the issuance of Islamic financial instruments. In the year 2013,
the government enabled a five-year tax window that was introduced in 2008 on specific
Islamic finance instruments to lapse, although the tax treatment for Islamic instruments
remains on par with conventional equivalents.

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Position of Islamic Banking and Finance

According to Wico, Zainul-Abidin, Allen & Glenhill (2012), although banks like DBS
Bank, Maybank and Cimb offers shariah compliant products such as Mudarabah,
Musharakah, Murabahah and Ijara2, Singapore remains behind in its Islamic banking sector,
where provisions of services are relatively less prominent than its predominantly Muslim
neighbouring countries. Its majority population of Non-Muslims results in financial
institutions to shy away from advancing its Islamic consumer or retail banking. Not only that,
it’s Muslim community only makes up for 14% minority which further “scares” the
institutions to do more.

As stated by the group chief executive officer of Dubai Islamic Bank, Adnan
Chilwan, “Singapore has not really capitalized as it should have done given the strength of its
financial system”. To further prove that, he says in his speech, at the IFN Forum Singapore
earlier this year, that when the company was intending to expand their operations to Far East
Asia, Singapore was not one of their options. He explains the reason behind it is because “it
(Singapore) does not have the intention of really tapping Islamic wealth and liquidity”
(Wright, 2019). Even with the establishment of new shariah-based retail funds by Franklin
Templeton Investments in 2013, there were still less than 20 Shariah compliant funds
available in Singapore as of 2014 (Simmonds, 2014).

However, things have been turning around the last few years for its finance industry
as Singapore has been one of the destinations for Sukuk roadshows by issuers including
Emaar Malls Group, Damac Real Estate and Turkiye Finans. Furthermore, Malaysian Banks
as well as UAE-based FGB have committed to expanding its operations in Singapore and
growing their Islamic finance offering, as mentioned by Simmonds (2014). Other attempts
include FTSE Russel’s launching of a new Shariah-compliant index for Shariah-compliant
stock investments called the FTSE ST Singapore Shariah Index in 2018. This index identifies
Shariah-compliant companies from the Singapore Exchange as demand for Islamic
investment products continues to see stable growth in the region. The new index intends to
observe whether the companies' business activities are shariah-compliant so as to develop a

2
According to smartmamat.com (2018), the aforementioned terms refers to:
Mudarabah = Profit and loss sharing
Musharakah = Partnership and joint stock ownership
Murabahah = Exchange transaction in which the seller acquires a commodity and sell it to a buyer at a mark-up
price
Ijara = Leasing

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reliable and authoritative index, some of them including Singtel, Hongkong Land, Keppel,
ComfortDelGro, Singapore Airlines and so on (Maierbrugger, 2018).

Sukuk and Islamic REITs

For further detail, Sukuk can be known as Islamic financial certificate, which is
similar to a bond in western finance, and complies with Islamic religious law commonly
known as Sharia. Here, the issuer of a sukuk sells an investor group a certificate. After that, it
will be used to proceed in purchasing the asset in which the investor group has partial
ownership. This happens because the traditional western interest-paying bond structure is not
permissible in Islamic finance. The issuer is obligated to a contractual promise to buy back
the bond at a future date at par value.

A sum 31 Sukuk were issued in Singapore while the exchange lists a number of recent
issuances that includes US$300 million Sukuk Wakalah which were issued earlier this year
by the Export- Import Bank of Malaysia. The US$118 million Sukuk Murabahah were issued
in the month of July by Golden Assets International Finance. Furthermore, Singapore’s
government established a SG$200 million (US$157.73 million) Sukuk Al-Ijarah Trust
Certificate Issuance in the year 2009. The conventional Singapore Government Securities are
similar to the program as the Shariah compliant, with returns under the Sukuk tied to the risk-
free yield of government securities of the same length.

In the year 2010, the Sabana REIT was founded and has since been Singapore’s first
Islamic REIT. It includes trust holds of 22 properties while in the year of 2014, month of
August it has announced it was in the process of acquiring a warehouse in the Changi South
Industrial Estate for US$55 million. This happened in a deal that was expected to be
concluded in the final quarter of the year. A tough year was experienced by the trust as they
had to deal with gross revenue for the second quarter of 2014 up by 17% in year-on-year
figures, but unfortunately, net property income and income available for distribution both
down as the country’s commercial property sector are catastrophe a slowdown and the trust’s
expenses continue to rise.

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Opportunities

Even so, Maierbrugger (2018) states, Singapore’s Islamic banking industry may grow
as its regulations, consistent regulatory regime and an efficient government coupled with an
excellent business infrastructure, economic freedom and a wide talent pool. By relying on
these strengths, Singapore may further develop its wholesale banking services, asset
management and capital markets; the three areas of which Lim Hng Kiang, the minister for
Trade and Industry and the Deputy Chairman of the Monetary Authority of Singapore , has
identified to be of importance to Singapore’s growth in Islamic finance and banking (Wico et
al., 2012). Even with a relatively small population of Muslim community, Non-Muslims
should be encouraged to participate as a beneficiary of the Islamic banking industry, so it has
a chance to further prosper.

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References

Constitution of the Republic of Singapore (1999) Art 15/153

Gulf Asia Shariah Compliant Investments Association. (2017, July 30). Development of
Islamic Finance in Singapore. Retrieved from http://www.gascia.org/development-of-
islamic-finance-in-singapore/

Jurisdiction of the Supreme Court. (July, 2019). Retrieved from

https://www.supremecourt.gov.sg/about-us/the-supreme-court/supreme-court-
jurisdiction
List of Islamic Banks in Singapore. (2013). Global Banking & Finance review. Retrieved
from https://www.globalbankingandfinance.com/list-of-islamic-banks-in-singapore/

Maierbrugger, A. (2018, October 23). Singapore is Giving it Another Try to Embrace Islamic
Finance Growth. Gulf-Times. Retrieved from https://www.gulf-
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Morgan, G. (n.d.). A Guide to the Singapore Constitution. Retrieved from

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Practical Law. (n.d.). Retrieved from https://uk.practicallaw.thomsonreuters.com/w-007-

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system

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Smartmamat. (2018, January 3). The Definitive Guide to Islamic Banking and Finance in
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