Royal Group has obtained the world’s first Islamic green financing in hospitality from Maybank Singapore. The total financing of S$250 million is for the upcoming Raffles Sentosa Resort & Spa Singapore and the existing Sofitel Singapore Sentosa Resort & Spa. This marks Royal Group’s first foray into sustainability finance.
The principles of sustainability are closely aligned with the objectives of Shariah which promotes and enhances sustainable development through the principles of fairness, equality and ethics.
These Islamic green-financed hotels will embed Shariah-compliant and sustainability concepts in its building design and operations.
With green and socially responsible commitment, Royal Group is aiming to improve its business sustainability which bodes well for environmental conservation, as well as enhance operation efficiency which will bring about financial savings in the long term.
The main difference between a conventional green loan and a Shariah-compliant green financing is that the latter is structured in accordance with Shariah principles where instead of charging interest (as this is not allowed under Shariah), a bank will charge the client profit in consideration of the financing.
There are additional features of Shariah-compliant financing which benefits the client, such as (i) fixed ceiling rate feature embedded in the facility structure to provide an element of certainty to client so that they will not pay more than the contracted rate and (ii) non-compounding of profit/charges in the event of late payment of amounts due.