One of the questions that some of our Muslim clients commonly ask about is on Shariah-compliant financing.

In certain countries, like Singapore, Shariah-compliant financial solutions are limited. We are small country of less than 6 million people at the time of this writing and only about 15% of us are Muslims.

Thus, even though it is the duty of every Muslim to avoid what is forbidden, such products are simply not sustainable enough for financial corporations to consider seriously. Hence this has become somewhat of a dilemma for us.

But here’s a fact: “Shariah-compliance” accounts for a mere fraction of the multiple considerations needed for Muslims to make a holistic and sound financial plan.

Also, in order to find the best financial solutions (if you are a Muslim), one must first understand the difference between “halal” finance and “Islamic” finance. Because, despite their similarities, what may be Halal may not necessarily be Islamic.

As surprising as this statement may be, let’s look deeper into their very definition.

Halal Defines What is Permissible, Not What is Good

“Halal” means “permissible” in Arabic. Specifically, halal can be further defined as “permissible to Muslims”. It’s a very simple text definition, yet has more to it in application.

Essentially, Muslims can consume or partake in anything that is not expressly forbidden by the Quran or hadith. However, we must also understand that something that is permissible may not necessarily be good. Several hadith has shown that Islam sometimes frown upon some things that are technically halal in nature:

The reasoning: all the above can stem from (or lead to) unjustifiable excess, ill-discipline and/or non-justifiable outcomes. Simply put, they may perpetuate more bad than good.

That is why halal financing does not necessarily translate to something positive. Debt, whether permissible or not, is fundamentally negative. Hence it is much better to focus on proper financial management than seeking out to leverage on “halal’ financing that can only lead up to unnecessary added stress and worry.

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Islamic Solutions: What It Actually Entails

Whereas defining halal finance entails analyzing on just its permissibility, Islamic finance as a whole is far more complex. Personally though, I define Islamic finance into three categories:

  • Conservation from personal financial hardship.
  • Communal support through shared resources and growth.
  • Charity to enable the financially disabled.

Below is a short summary explaining each aspect:


In terms of commercial viability, the conventional banking system may see Islamic finance’s restrictions of riba, gharar and maisir (usury, uncertainty and gambling) as disadvantageous to business sustainability or growth. But the command of abstinence from the above three is designed specifically for wealth conservation. Restrictions are placed to remove unfair advantage and injustice that may cause financial loss and hardship to any parties. Simply put, when a condition is placed so that one party benefits more than the other, fairness can be compromised.

Another example of wealth conservation is the ruling on faraid distribution. In this case, however, it is about the conservation one’s family members from financial hardship after one’s passing. In Islam, it is the duty of the men within the immediate family circle of the deceased to ensure the welfare of the deceased family, especially the women. For the widow, it would be during the iddah period. For the daughters, it is until she is married off. While the male family members are taken care of until he can sufficiently earn income to care for himself.


Investing for personal profit is halal and permissible. In Islam, however, being sufficiently modest with ones wealth is better. Instead, emphasis on financial prosperity is placed through shared benefit. For example, investing in a business offers shared benefits and risks to both the investor and investee. When there is growth, both stands to gain. When businesses sustains losses, the investor’s role removes some of the hardship of the investee (in Islam, removing hardship from one another itself is encouraged).

That does not mean that the investors should put themselves in a position that could cause severe set back, however (see above point on “Conservation”).


In Islam, wealth is not a pursuit. Every Muslim is only obligated to protect what he or she already has and to maximise those resources. Excess wealth is best channeled towards redistribution to the community. Zakat, one of the five pillars of Islam, is the most obvious reference for this. On top of that, charity also encouraged, for it promotes collective communal growth as opposed to personal achievements.

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Non-Halal Solutions in Islamic Finance?

While it is in the best interest of the community to partake in halal solutions, Islamic finance advocates for Muslims to avoid hardship.

It may be a bit controversial, but there have been instances in Islam where non-halal solutions are used as a necessary fall back. For example, after careful consideration, the MUIS‘s Fatwa Committee has taken a neutral stand towards conventional insurance solutions in SingaporeThis is an example of how a rukhsah is decided by the Committee, with the purpose of ensuring prosperity for the community.

Let’s take a leaf from this and applying it to home financing in Singapore. As earlier mentioned there are currently no shariah compliant mortgage solutions available in Singapore for the individual consumers. Those who wish to partake in a fully permissible solution would have to either migrate to a country that provides it or rent a home throughout their life (the latter, as it turns out, is not economically viable).


Although there should be continued efforts to find a halal financing solution for major commitments like home purchases, the community should emphasize on ensuring sound personal financial management, because financial management IS part of Islamic finance. With readily available solutions such as refinancing, making the right home choices, and renting out in the market, an Islamic financial real estate “portfolio” is really not a far off ideal.

We do look forward for more halal offerings for Singaporean Muslims in the future. In the meantime, you can start off your financial portfolio by re-looking at the interest-based liabilities for your home. Let us know if you wish to discuss with us on how we can help you in this!

About The Author

About The Author

Shamir Wahid

Shamir has more than 8 years of banking experience across various areas in Retail, Corporate and Private banking (including Islamic finance) for one of the largest banks in Southeast Asia. In Corporate Banking, he was involved in structuring loan transactions for real estate developers and REITs. He also worked with private bankers to provide credit solutions to their high net worth clients.