A maiden issue that bowled them over

In 2001, Majlis Ugama Islam Singapura (MUIS) issued the first Islamic bond in Singapore. Initially structured as a bay` bi-thaman `ajil security (ABBA), the bond was managed by the investment office of a local Singapore bank. The ABBA was found to be shari`a noncompliant, so the bond was restructured as a musharaka offered to investors who contributed capital. Singapore Monetary Authority as well as the tax authorities sought to define any amounts above the principal as interest to prevent investors from avoiding taxes on the revenue earned. This spurred a debate among shari`a authorities over the inclusion of the term “interest” in the agreement. Though there is a need for innovation in the Islamic banking sector, investors in this sector must always be mindful shari`a principles.