/ 23 February 2024

The practical, religion-agnostic world of Shari’ah financial services

Imtiaz Suliman Sentio Capital
Imtiaz Suliman, Head of Shari’ah, Sentio Capital Management

A differentiated segment of financial solutions available to all consumers

Shari’ah- or Islamic-compliant banking and investments represents a form of financial services that complies with Shari’ah religious law and its practical application in Islamic economics. Shari’ah forms part of the Islamic tradition and is derived from the religious precepts of Islam. It is based on the sacred scriptures of Islam, particularly the Quran and the Hadith.

Not all financial institutions in South Africa offer Shari’ah finance solutions, but Standard Bank, Absa, FNB, HBZ and Nedbank are some that offer Shari’ah-based products and services — and these products and services are available to people of any faith.

There are ways that Shari’ah financial products differ, such as Shari’ah-compliant savings accounts that provide the same day-to-day banking services as mainstream accounts, but don’t give the client a return on their money; nor do Shari’ah financial services providers offer overdraft facilities, as the principle of paying or charging interest (riba) is against Islamic law. Instead, there is profit and loss sharing and other methods to promote financial justice according to Shari’ah.

One company specialising in Shari’ah-compliant investing is Sentio Capital Management (Sentio), which offers investors a range of Shari’ah-compliant funds across the risk spectrum. Sentio has, since its inception in 2007, deployed a hybrid-intelligent approach that combines human expertise and experience with cutting-edge technology.

“Unlike other players in the industry that are just beginning to adopt artificial intelligence and machine learning into their investment process, Sentio has been utilising these technologies since 2007,” says Sentio’s head of Shari’ah, Imtiaz Suliman. “As a result, our investment team is equipped to make high-conviction investment decisions that deliver superior risk-adjusted returns for our clients over the long term.”

He adds: “As a person who follows the Muslim faith, my values, actions, and beliefs are shaped by it. In my current role, I make sure that investments are made in accordance with the principles of Shari’ah investing. This means avoiding industries that are considered socially harmful such as alcohol, tobacco, gambling, pornography, military equipment and interest-based finance.

“We appreciate that we have a great financial policy in South Africa — one of the best in the world in terms of financial governance, and the financial sector operates in a sound environment. Shari’ah adds a dual layer of governance, which gives it a good risk posture.”

“Any potential investor needs to consider their ethical screening criteria. With Shari’ah-compliant investing, adhering to Islamic principles is required, which usually aligns with ethical investing goals. By applying screening criteria based on the Shari’ah principles, investors can ensure their investments avoid prohibited sectors while focusing on industries deemed ethical and promoting social responsibility — and investors can achieve their investment goals without compromising their beliefs.”

Innovation through technology

Ameen Hassen, Standard Bank’s Head of Shari’ah, when asked whether he sees Islamic finance adapting or changing into the future as consumers evolve, replies: “I don’t believe Shari’ah principles are going to change, and I don’t see any future leniency in the strict borders that are clearly defined and have been in place for multiple decades and are grounded in Islamic faith.

“What I do see, as Shari’ah becomes more mainstream in terms of more finance houses offering products, is a lot more innovation coming through as competing Shari’ah financial providers differentiate themselves through the application of technology.”

Ameen Hassan, Shariah
Ameen Hassan, head of Shari’ah, Standard Bank

Hassen says he sees Shari’ah’s popularity growing, especially when considering what is happening at the global macro socio-political level, which affects patterns.

“Although Western Europe and particularly the US are traditional drivers of global economies, we are seeing trends shifting towards the east. Just considering BRICS members, these are now large economies. Almost 50% of the eastern side of the globe is Muslim and countries such as Turkey, Pakistan, Afghanistan, Indonesia and other countries in the Middle East and Africa have strong or predominant Muslim communities.

“As we see these economies grow and as people become increasingly familiar with Shari’ah, we will see interest in it continuing to filter down into retail. In South Africa, I see between three to five years of accelerated growth and then I believe it will stabilise organically.”

While the principles of Shari’ah might not suit everyone, there is no denying the steady rise in the uptake of Islamic financial products and services, and new finance house entrants are adding this option to their financial portfolios. 

As mentioned, these products are not exclusive to those of the Muslim faith, and according to Suliman, a subset of environmental and social governance (ESG) has also contributed to more non-Muslims investing through Shari’ah products. Anyone wishing to invest responsibly and ethically may open a savings or asset investment account.

“In South Africa, only around two percent of the population are Muslims. Although our data is rather rudimentary and noisy, as we have filters in place for privacy purposes — such as not asking what religious persuasion a person is — we guesstimate that around 35% to 40% of our client base is non-Muslim here,” says Hassen.

“There is no discrimination in terms of clients. We accept people of all races, religions and creeds. All they need to open an account is a valid identity document.

“While discrimination is a sad fact of life, it is very interesting that there is little to no discrimination based on religion in South Africa. We actually take for granted a lot of the time that South Africans are a population of deeply religious people. We also don’t tend to see that there is actually some cross-over in beliefs, such as the Jewish and Muslim population having similar convictions based around the Old Testament, including some of the basic prohibitions.”

Regulation and governance

The question that is always at the top of consumer minds is the protection of investments and how Shari’ah differs from mainstream banking in terms of the very strict regulations in place to protect the consumer — which some may perceive as a distinct advantage of Islamic banking.

Institutions must be Shari’ah compliant, and while all financial institutions must be Financial Services Authority authorised, Shari’ah compliance goes a step further. Finance houses that are Shari’ah compliant also have an independent Shari’ah Supervisory Board consisting of scholars with expertise and experience in Islamic banking and finance, as well as an internal Shari’ah Advisory Department and an internal Shari’ah Audit Department.

These bodies are in place to ensure a finance house’s full compliance with Shari’ah in its day-to-day business activities. On an ongoing basis, institutions’ financial products are developed, reviewed and audited under the guidance of the Shari’ah Supervisory Board.

“Insofar as consumers have the comfort of using FSA registered and accredited institutions, they do also have the added comfort of the additional Shari’ah Supervisory Board and its own internal units with expert teams,” says Hassen. “In effect, it’s a dual layer of governance that enhances the Shari’ah risk posture.

“Sadly, in every industry, there are rogues and pockets of rotten apples who operate out of a regulated environment. We urge consumers to do their homework and ensure their investments are handled by proper scholars of repute.”

Asked what advice he would give to investors who feel drawn to more ethical types of investments but are worried about the potential impact on returns, Suliman says it is important to focus on long-term performance.

“While it’s true that some ethical investments may have slightly lower returns in the short term, focusing on long-term performance is crucial,” he stresses. “Ethical investing often involves companies with sustainable business practices, which can contribute to stable returns over time.


“Diversifying your portfolio across various ethical investment opportunities can also help mitigate risk while potentially enhancing returns. Shari’ah-compliant investment options span multiple sectors and geographies, providing ample opportunities for diversification.

“Conducting thorough research and due diligence on potential investments is always very important. Look for companies with strong financial fundamentals, ethical business practices, and a commitment to sustainability. Evaluating these factors can help identify investments with the potential for ethical impact and financial returns.”

Suliman advocates consulting with financial advisors, especially if a person is uncertain or new to investing. “Seek guidance from registered financial advisors who are experienced in ethical and Shari’ah-compliant investing. They can provide personalised advice tailored to your investment goals, risk tolerance and ethical preferences.”

Hassen agrees, saying that investors need to get their own financial advice from experts in the Shari’ah context, as they would for any other potential investments.

“Regularly monitor your portfolio’s performance and reassess your investment strategy as needed,” continues Suliman. “Market dynamics and ethical considerations may evolve over time, requiring adjustments to your investment approach.”

Asked about the outlook on the local and global economy, Hassen is optimistic, but says that about one billion people in multiple countries are going to the polls this year, including South Africa, so this is a factor that the investment community is cautious about, due to the changes that could arise.

“I do see the Reserve Bank reducing the interest rate in the medium-term and there are indicators that the rand can appreciate to the USD. Globally, investors will be careful over the next 18 months or so, seeking steady, tempered growth and South Africa will follow suit,” says Hassen.

Adds Suliman: “Geopolitics and political tension is rife, such as that between the US and China and Russia and the Ukraine. These impact certain commodities, but we are seeing indicators that prices on these are normalising. Sound investment strategies should always factor in global geopolitics in the same way that other issues such as unemployment, inflation, market performance and rate hikes impact the global economy.”

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