Islamic finance in South Africa
When your savings span retirement funds, investments in your own name and money offshore, keeping all of it Shari'ah-compliant means more than choosing one fund. Each part has to comply, and to work with the others on tax, income and your estate. I help families build that plan.
What is Shari'ah-compliant investing?
Shari'ah-compliant, or halal, investing follows Islamic law: no interest, no companies whose main business is prohibited, every remaining company tested against financial screens, and any small impermissible income given to charity. In South Africa it is available in unit trusts, index funds, sukuk, retirement annuities, living annuities and offshore funds, so a whole financial plan can be built on it.
In short
Families with substantial savings who want their whole financial life to follow Shari'ah principles: retirement annuities and preservation funds, a portfolio held in their own name, money offshore, property, and the estate they leave. Often the savings have built up over many years in a mix of products, not all chosen with Shari'ah in mind, and the question is how to bring them together without unnecessary tax or cost.
As on the rest of this site: all of my investment strategies are also available in Shari'ah-compliant formats, including offshore options.
★★★★★We were introduced to Munaf via Gradidge Mahura Investments (Pty) Ltd (GMI) who were appointed to assist UCTRF members approaching retirement with retirement planning. Munaf's service ethic, professional attitude, and his knowledge of investment products, including Sharia compliant products met all of our expectations. We were kept up to date throughout the process and he was always available to answer any questions. Asia & Dilshaad Brey (UCT employees)
Google review
Returns cannot come from lending at interest. Cash and income holdings use Shari'ah-compliant alternatives instead of conventional bonds and deposits.
Companies whose main business is prohibited, such as conventional banking and insurance, alcohol, gambling or pork, are excluded.
Companies that pass the business screen are also tested on their finances, for example how much interest-bearing debt they carry and how much of their income comes from interest. Many screens are based on AAOIFI Shari'ah Standard No. 21 on financial papers; index providers set slightly different limits, so the same share can pass one screen and fail another.
Where a small part of a company's income is impermissible, that share of the dividends is typically given to charity.
Shari'ah-compliant funds are normally overseen by a Shari'ah supervisory board appointed by the fund manager, which approves the screening rules and reviews the portfolio.
| Conventional portfolio | Shari'ah-compliant portfolio | |
|---|---|---|
| Income and cash | Bonds, deposits and money market funds that pay interest | Sukuk, Shari'ah income funds and Islamic deposit accounts |
| Shares | Any listed company | Only companies that pass the business and financial screens |
| Impermissible income | Not considered | Purified: the share of dividends is given to charity |
| Oversight | The fund manager and the regulator | The same, plus the manager's Shari'ah supervisory board |
| Retirement rules | Regulation 28, two-pot, tax tables | Exactly the same rules apply |
| Building block | Shari'ah-compliant form | What to check |
|---|---|---|
| Unit trusts | Shari'ah equity and balanced funds | The supervisory board, the screening method, fees |
| ETFs | Shari'ah index-tracking funds | Which index is tracked and how it is screened |
| Income and cash | Sukuk and Shari'ah income funds | Credit quality and liquidity |
| Retirement annuity / preservation | Shari'ah fund choices within the product | That every underlying fund is compliant, and Regulation 28 limits |
| Living annuity | Shari'ah fund choices within the product | Income rate, fund choice, fees |
| Offshore | Global Shari'ah funds, held directly or through a local fund | Currency, the offshore allowances, estate implications abroad |
Screening narrows the universe, which can leave a portfolio concentrated in a few sectors and short of the income assets a conventional portfolio uses. A sound Shari'ah portfolio still needs a mix of growth and income assets, a share offshore, and a plan for currency risk. Inside retirement funds, Regulation 28 limits still apply: up to 45% may be invested offshore.
A living annuity can be invested entirely in Shari'ah-compliant funds, with an income you set between 2.5% and 17.5% of its value each year. The care point is the income portion: without conventional bonds, the stable part of the portfolio comes from sukuk and Shari'ah income funds, and the drawdown rate has to respect how those behave.
The same retirement rules apply as for everyone: the lump sum tax table, the two-pot system and the choice between living and life annuities. See Preparing for retirement.
South African law lets you decide in your will how your estate is shared, so a will can be drafted to follow Islamic succession. It must still meet South African requirements, and estate duty still applies: 20% of the dutiable value up to R30 million and 25% above, after an abatement of R3.5 million. Retirement fund benefits pass under the fund's rules and your nominations, not your will, so the two need to be planned together.
Lifetime gifts can also play a part: in 2026/27 each person can give up to R150 000 a year free of donations tax, and gifts between spouses are exempt. For larger estates, the order in which assets pass, and which of them pay the duty, deserves as much care as the will.
How I Work
Good financial planning starts with understanding your circumstances, priorities and what you want to achieve.
My approach is to consider your financial position as a whole, rather than looking at investments, retirement income, tax and estate planning decisions in isolation.
I aim to provide objective, practical advice that helps you understand your options, make informed decisions and put an appropriate strategy in place. The focus is on adding meaningful value, not introducing unnecessary complexity or recommending changes simply for the sake of change.
Advice that considers how your investment, retirement, tax and estate planning decisions fit together.
Recommendations based on your circumstances and goals, including retaining existing arrangements where these remain appropriate.
Regular reviews and adjustments as your circumstances, needs and financial priorities change.
We discuss your circumstances, objectives and priorities, and identify the areas where advice may add value.
I review your existing arrangements, assess relevant options and prepare recommendations tailored to your circumstances.
We discuss the recommendations, agree on the appropriate actions and implement any changes where necessary.
We review your strategy over time and adjust it as your circumstances, objectives and needs evolve.
Sometimes the best advice is to retain what you already have. Where your current arrangements are appropriate, I will explain why, rather than recommend changes that offer little or no meaningful benefit.
For Shari'ah-compliant clients, every recommendation is checked for compliance as well as for tax, cost and fit with the rest of your plan.
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Tell me a little about your circumstances. If Shari'ah-compliant planning is what you need, select it in the first question.
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They are investment funds that only hold assets permitted under Islamic law. They avoid interest-bearing investments and companies whose main business is prohibited, test the remaining companies against financial screens such as debt levels, and usually purify any small impermissible income by giving it to charity. A Shari'ah supervisory board appointed by the fund manager oversees the rules and the portfolio.
Most Shari'ah scholars permit owning shares in companies whose business is permissible, because a share is ownership in a real business rather than a loan. The company must pass the business screen and the financial screens, and any small impermissible income is purified. Speculation and interest-based trading, such as buying shares on borrowed money, are excluded.
There are Shari'ah-compliant unit trusts, index-tracking ETFs, sukuk and income funds, and Shari'ah fund choices inside retirement annuities, preservation funds and living annuities. Global Shari'ah funds are available for offshore investing. Which ones suit you depends on your goals, your tax position and how each fund is screened and supervised.
Check the fund's fact sheet and minimum disclosure document. A compliant fund names its Shari'ah supervisory board or certifying body and explains its screening method. If a fund does not state this, treat it as conventional. Index funds should also say which Shari'ah index they track and how often it is reviewed.
Yes, provided every underlying fund you choose inside the retirement annuity is Shari'ah-compliant. The product itself is a wrapper; compliance comes from the funds in it. The usual retirement rules still apply, including Regulation 28 limits, the two-pot system and access from age 55, so the fund choice has to work within them.
Yes. Global Shari'ah equity and sukuk funds can be held directly offshore or through a South African fund that invests abroad. A resident adult may invest up to R2 million a calendar year under the single discretionary allowance, and up to R10 million more a year with an approved SARS tax compliance status (AIT) PIN.
No. A will can follow Islamic succession, but estate duty applies to the estate in the usual way: 20% of the dutiable value up to R30 million and 25% above, after a R3.5 million abatement. Planning for liquidity, so that duty and costs can be paid without forcing a sale, matters as much as the will itself.
Rules and figures on this page were checked against these official sources on 9 October 2026.
