An Islamic robo-advisor is an automated portfolio management platform that invests clients' savings only in assets screened for Sharia compliance, such as compliant equity ETFs, sukuk or gold, in exchange for a fixed management fee.
What an algorithm does with your halal savings
The platform gathers information about the investor, calculates a target allocation, buys the matching funds and then monitors the portfolio continuously. No human adviser steps in day to day, which keeps fees low and sometimes allows a starting amount of only a few hundred euros.
Risk questionnaire and the split between shares, sukuk and gold
Age, horizon, income and the expected reaction to a market fall define a profile ranging from cautious to adventurous. A cautious profile might hold 60% sukuk, 30% screened shares and 10% gold, while an adventurous one almost reverses those weights.
Automatic rebalancing without speculation
When shares rise, their weight exceeds the target, so the software sells part of them and buys sukuk to restore the planned allocation. These are spot purchases and sales of assets actually held, with no bet on prices and no leverage.
What happens to uninvested cash?
Between contributions or after a sale, a small portion remains in cash. A conventional manager earns interest on it, whereas an Islamic platform keeps it in a non-remunerated account or purifies any interest credited by its custodian by giving it to charity.
How Sharia screening is built into the code
The robot does not judge companies itself: it relies on lists produced by index or data providers, following a methodology approved by a Sharia board. The code then applies those lists to every purchase it makes.
Islamic indices tracked through ETFs
Most portfolios use ETFs that follow Islamic indices published by major providers such as S&P Dow Jones or MSCI. These indices exclude prohibited sectors and over-indebted companies and are generally reviewed every quarter.
When a company stops being compliant: the time allowed to sell
When a company leaves the index because its debt has crossed the threshold, the fund must sell it within a reasonable period. Sharia boards generally accept this selling window to avoid a rushed loss-making sale, provided the gains concerned are purified.
Purification calculated by the software
For each holding, the platform estimates the share of dividends coming from unlawful income, for example 2% of a company's revenue. It shows that amount on the annual statement so the client can donate it, or deducts it automatically, depending on the service.
Management fees paid on a wakala basis
The manager acts as the investor's agent and charges a fixed fee, often expressed as an annual percentage of assets, for instance 0.5%. Unlike a Mudaraba, it takes no share of profits and guarantees neither capital nor return.
Short selling, leverage and securities lending ruled out
A conventional robo-advisor may lend the securities it holds to short sellers in return for interest, or offer leveraged portfolios. These practices are excluded from the Islamic version, along with speculative derivatives and conventional bonds.
Who certifies that the robot is compliant?
A Sharia board of specialised jurists approves the screening methodology, the fund list and the fee model, then issues an opinion. A periodic Sharia audit checks that actual transactions follow those decisions, often with reference to AAOIFI standards.
Before opening an account with an automated platform
Check that the company is licensed as an investment manager by your country's financial authority, read its published screening methodology, compare total costs including ETF charges and review withdrawal terms. The service is not available in every country.
Specialist external source
AAOIFI publishes its accounting, governance and Sharia standards, including those on financial securities and investment agency that Islamic fund managers rely on.