One religion that has very specific governing principles when it comes to financial aspects is Islam. Until now, there have been very few feasible financial services solutions for South African Muslims who want to honor their Islamic faith in this regard.

Shariah-compliant investment is a growing phenomenon in both Muslim and non-Muslim countries, and it is structured within Islamic restrictions, whereby a company is expected not only to operate in accordance with the law and regulations of a given jurisdiction, but also to seek to achieve both the pleasure of God and the optimisation of social welfare. In other words, do good and be good!

According to a report by consulting firm PricewaterhouseCoopers (PwC), Shariah-compliant funds grew at an annualized rate of 26% in the first ten years of this century.

Similar to socially responsible investing, Shariah-compliant investing dictates social values and good governance by sifting out businesses that engage in activities, which among others are regarded unethical, such as: Alcohol, Tobacco, Pornography, Gambling, Pork products, Military equipment or weapons. Socially responsible investing is an investment strategy that can include companies making a positive sustainable or social impact, such as a solar energy company, and exclude those making a negative impact.

As stated above, shariah compliant portfolios are not only utilised and created for Muslims. Many Non-Muslims’ add these instruments to their portfolios as an asset allocation factor. For instance, Gold or Oil ETF’s. Many of our existing clients have started to bear the fruits of socially responsible investing. We have introduced structured products into their diversified portfolios that track different environmentally and CDP (Carbon Disclosure Project) friendly indices.

Financial services and fiduciary challenges for Muslim communities:

  • Islamic law of inheritance varies significantly from South African law of intestate succession. This means that an estate administered under South African law will not be administered according to the principles set out in the Qur’an.
  • Conventional insurance is considered as impermissible because it incorporates elements of gharar (uncertainty), maysir (gambling) and riba (interest), all of which is prohibited in the Qur’an. As a result of this, too many Muslim families remain at risk or are forced to take out insurance that goes against their religious beliefs, to protect their family when the primary breadwinner passes away.
  • Tazkiya™ – is a Shariah-compliant Will, Family Takaful and estate administration offering recently introduced in South Africa.
  • The word “Tazkiya” is derived from an Arabic word that means ‘to purify’. Capital Legacy has created a Family Takaful structure which will ensure that all the contributions clients make to the fund, to protect their families from the costs associated with their passing away, will remain untainted by interest and uncertainty, keeping it pure.
  • The Wills are drafted in a way that they are to be administered according to Islamic principles and according to the required Islamic laws of inheritance.
  • As the life cover component is Shariah-compliant, a Muslim client can nominate a direct beneficiary of the life cover or simply leave it to his or her estate to make up any shortfall for the Islamic heirs.
  • Through the Family Takaful, Muslim clients can secure long-term insurance that is Shariah-compliant to provide their loved ones with an immediate cash benefit, financial provision to cover monthly expenses while their estate is being wound up, and cover to provide for the inheritance taxes should both spouses pass away within quick succession.
  • Muslim clients have peace of mind that when they create a testamentary trust for their minor children through their Will, that this trust will be administered in line with their beliefs, ensuring the inheritance remains Shariah-compliant.

“There are more than a million people of Islamic faith in South Africa and our research shows that as few as 11% have adequate life cover in place.” (Source: Capital Legacy).

As an Authorised Financial Services Provider, Harbour Wealth specialises in providing holistic financial planning solutions to cater for all individual needs. These include offshore and local investment, structuring, long term insurance, retirement and estate planning needs.

If you are interested in hearing more about Tazkiya or Socially Responsible Investing options, please make contact with any of our experienced Wealth Planners.

Leave a comment