Shariah methodology
What is purification in halal investing?
What purification means, why some investors use it and how it is typically handled.
The short answer
Purification is the scholarly practice of separating the small portion of income considered non-permissible (for example from interest-related income) and donating that amount to charity. It is not a legal requirement but a religious practice used by some investors to address incidental non-permissible income.
What investors purify
Purification usually applies to dividend receipts that are partially tainted by a company’s non-permissible income. Investors calculate the non-permissible portion and donate that amount to charity rather than keeping it.
Shariah-compliance considerations
Purification is a scholarly matter and methodologies differ. Our platform states that AAOIFI Shari'ah Standard No. 21 is the practical benchmark used here for screening. For personal religious rulings and exact purification methodology you should speak to a qualified scholar.
What this means in practice
- 1Keep records of dividend amounts and the screening percentage attributed to non-permissible income.
- 2Calculate the non-permissible portion for each dividend according to your chosen methodology.
- 3Donate the non-permissible portion to a suitable charity and document the donation.