How we determine whether a stock is Shariah-compliant, needs review, or should be avoided.
Our screening methodology is anchored to the S&P Shariah Indices framework, one of the most widely recognized standards for Islamic equity screening globally. Every stock in our universe passes through two layers of filtering: a sector-level screen that eliminates industries incompatible with Islamic principles, followed by a financial ratio screen that evaluates the company's balance sheet against strict thresholds.
Stocks that pass all checks are marked Halal. Those that fail one or more hard rules are marked Non-Compliant. Stocks that pass the automated checks but carry flags requiring human judgment are marked Requires Review.
Before any financial analysis, we check whether the company operates in a permissible industry. The following sectors are excluded outright, regardless of financial ratios:
Companies in permissible sectors must pass five financial ratio tests. Each ratio is designed to limit exposure to interest-based debt, non-halal income, and receivables-heavy business models.
Total Debt / 36-Month Average Market Cap
Measures the company's leverage against its long-term market value. A ratio above 33% indicates excessive reliance on interest-bearing debt.
Total Debt / Current Market Cap
A point-in-time check that catches recent leverage increases that the 36-month average might smooth over.
Non-Permissible Income / Total Revenue
Tracks how much revenue comes from non-halal activities (interest income, gambling, alcohol, etc). Must stay below 5% to pass.
Interest Income / Total Revenue
Specifically measures interest-based earnings. Companies with significant treasury income from interest-bearing instruments fail this check.
Accounts Receivable / Market Cap
Prevents investing in companies where the majority of value is tied up in receivables (which may represent interest-based transactions).
(Cash + Short-Term Investments) / Total Assets
AAOIFI standard: limits exposure to companies heavily invested in interest-bearing instruments like fixed deposits and bonds.
Passes sector screen and all five financial ratio thresholds. Suitable for Shariah-compliant investment.
Passes automated checks but carries flags (borderline ratios, mixed business activities, or data gaps) that need a scholar's review.
Fails one or more hard rules — either an excluded sector or a financial ratio exceeding the threshold.
This screening is provided for informational and educational purposes only. It is not a fatwa and should not be treated as a definitive religious ruling. Always consult with a qualified Shariah scholar or your personal advisor before making investment decisions. Financial data may be delayed and subject to revision.