The Royal Group of Companies has obtained the world’s first Islamic green financing in the hospitality sector of $250 million.

The loan, which was obtained from Maybank Singapore, is for the upcoming Raffles Sentosa Resort & Spa Singapore and the current Sofitel Singapore Sentosa Resort & Spa.

The loan is also the Royal Group’s first foray into sustainability finance.

The Islamic green-financed hotels will embed Shariah-compliant and sustainability concepts in its building design and operations.

Royal Group says it is aiming to improve its business sustainability as well as enhance operation efficiency, which will bring about financial savings in the long-term.

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The group is upgrading Sofitel Singapore Sentosa Resort & Spa to be assessed for BCA Green Mark Gold certification as part of its sustainability journey.

The key difference between a conventional green loan and a Shariah-compliant green financing is that the latter does not charge interest, according to Shariah principles. The bank will instead charge the client profit in consideration of the financing.

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In addition, Shariah-compliant financing does not compound profit or charges in the event of late payments due. A fixed ceiling rate feature is also embedded in the facility structure so clients will not have to pay more than the contracted rate.

“It’s a first in the world for a hospitality developer and owner to embark on Islamic green financing. Raffles Sentosa is envisaged as a prestigious landmark icon of Singapore overlooking the beautiful South China Sea, and we only want to have the best design, top-class facilities as well as appoint a world-class operator to enchant our well-heeled customers,” says Bobby Hiranandani, co-chairman of Royal Group.

“Being Shariah-compliant is not only going the sustainable route, but also being ethical in our approach in building and managing both properties. This is what makes our group unique – to think long term and be one step ahead of the curve.”

“When international travel resumes after Covid-19, customers would have a different mentality; they would want to live in a well-run property that is conscientiously built to blend in sustainably and harmoniously with the environment which Raffles Sentosa and Sofitel Singapore Sentosa offer,” he adds.

“Maybank Singapore is at the forefront of developing innovative financing solutions to fund new projects and ventures in sustainability solutions and contribute towards building sustainable communities,” says Gregory Seow, head of global banking at Maybank Singapore.

“What stood out in Shariah-compliant financing is that it benefits the customers through its product features as well as grant them access to a wider customer or investor base.”

“For example, corporates who take up Shariah-compliant green financing may attract a wider or new customer base – domestic and international customers who opt for and support goods and services offered by ethical, sustainable and responsible companies which are also aligned with Shariah principles. Moving forward, Maybank Singapore expects to see a greater convergence between the products and services offered under both the conventional and Islamic banking systems premised on ESG,” Seow adds.