General

The main difference between Islamic banking and conventional banking is that Islamic banking is primarily guided by the principles of Shariah, which include the following:

• Avoidance of Riba/interest
• Avoidance of Gharar/uncertainty
• Avoidance of Shariah non-compliant activities which are considered haram (e.g. gambling, liquor, pornography, pig farming, prostitution, entertainment, etc.)
• Profit generated from Islamic banking transactions must be backed by real economic activities (e.g. Commodity Murabahah transactions and real trading activities)

In addition to the principles of Shariah, Islamic banking is also governed by specific regulatory requirements to ensure Shariah compliance which includes the establishment of a Shariah Committee.

UOBM adopt the contracts based on the approved Shariah principles which includes:

• Qard (Loan)
• Murabahah (Cost plus sale)
• Wakalah (Agency)
• Bai’ Al-Dayn (Sale of debt)
• Kafalah (Guarantee)
• Bai Al-Sarf (Sale of currency)
• Wa’d (Undertaking)
• Tawarruq (Monetization)

Qard refers to a contract between a lender and a borrower where the latter is bound to return an equivalent replacement amount to the lender. The Qard contract must not result in any form of contractual benefit for the lender as a result of lending money.

Murabahah refers to the sale and purchase of an asset where the acquisition cost and the mark-up are disclosed to the purchaser.

A Wakalah contract is a contract in which a party, as principal (muwakkil) authorises another party as his agent (wakil) to perform a particular task in matters that may be delegated, with or without the imposition of a fee.

Bai’ Al-Dayn is the sale of payable rights or receivable debt either by the debtor himself or to any third party.

Kafalah refers to a contract where the guarantor conjoins the guaranteed party in assuming the latter’s specified liability.

A Bai Al-Sarf contract is where an exchange of money for money of the same or different type takes place.

Wa’d is literally a promise or undertaking and refers to an expression of commitment given by one party to another to perform certain action(s) in the future.

A tawarruq consists of two sale and purchase contracts. The first involves the sale of an asset by a seller to a purchaser on a deferred basis. Subsequently, the purchaser of the first sale will sell the same asset to a third party on a cash and spot basis.

The following products are offered via UOB’s Islamic banking business:

For individuals

For non-individuals

Yes, there are. The additional risks associated with Islamic products are reputational risk and Shariah non-compliance risk.

No, because Islamic banks and windows apply the same conventional financial benchmarks, such as BLR, KLIBOR, COFI, LIBOR, etc. to determine its cost of funds and return on financial investments.

No, both Muslim and non-Muslim customers are eligible to apply.

No, you can remain with your existing Relationship Manager as they are able to handle and offer Islamic transactions as well.

Any individual who is 18 years old and above can buy Islamic banking products and services.

Yes, all UOB branches will offer the full range of Islamic banking products and services.