Singapore’s path to Shari’ah compliant home financing is being blocked by bureaucracy. The Islamic Globe recently reported [see Issue 44] on the absence of Islamic home financing products despite the Monetary Authority of Singapore having legislated for a range of Shari’ah compliant Islamic banking structures. The MAS has also equalized the tax and stamp duty treatment of Islamic and conventional structures.
Moreover, The Islamic Globe has learnt from a well-placed source that Maybank Islamic in Singapore has for the past two years been in discussion with local government agencies to pave the way for Shari’ah compliant home financing.
However, the source indicated that the greatest hurdle lies with the Central Provident Fund, which runs the country’s social security system, a compulsory contribution scheme fully-funded by both workers and employers.
CPF provides three elements of financial security – retirement, home ownership and healthcare. It is predominantly with CPF savings and contributions that home ownership in Singapore has been made possible. Singapore’s Department of Statistics reports that as of 2011 the home ownership rate stood at 88.6%, with total households numbering 1,146,200.
The market for Shari’ah compliant home financing is undoubtedly there. However, our source stressed that discussions with the CPF are stuck at the statutory agency’s definition of what constitutes a ‘loan’, and that any interest-free Islamic structure does not gel with CPF’s understanding. The source said the CPF has not smoothed the road for Islamic home financing simply because “it is a hassle for the CPF”, that it would be “too much work to change” relevant aspects of the system.
The CPF did not respond to The Islamic Globe’s request for comment. It referred the newspaper to a factsheet on Singapore’s Housing Scheme.
Our source indicated, however, that other statutory bodies have been more flexible and open to discussions. Maybank Islamic in Singapore already provides Islamic term financing for business premises and commercial industrial properties following cooperation from relevant bodies, the Housing and Development Board and the Jurong Town Council.
The Islamic residential home financing pot of gold can only be won with CPF’s approval as it is the custodian of contributors’ funds needed to finance residential properties. Our source believes that a sympathetic “listening ear at the top” would make the difference.
To that, this newspaper twice sought comments from Singapore’s Minister-in-Charge of Muslim Affairs, Dr Yaacob Ibrahim, who twice declined to comment.