Halal investing
What makes a stock Shariah-compliant?
The two layers of checking a stock and the evidence you should look for before trusting a compliance label.
The short answer
Our platform uses AAOIFI Shari'ah Standard No. 21 as its default practical benchmark. It checks a company's main business first, then its financial ratios. You still need the data date, calculation method, reviewer and update frequency before relying on a result.
Business activity and financial structure
AAOIFI Standard 21 starts with the company's main activity. If the core business is prohibited, the stock does not pass the screen. It then checks three practical measures: non-permissible income must be below 5% of total income; interest-bearing debt must be no more than 30% of market value; and interest-bearing cash or securities must be no more than 30% of market value.
These tests use public company data and need regular review. Providers can use different data dates or market-value calculation periods, so two credible screens can still show different results. Always check how the provider applies the standard.
Shariah-compliance considerations
AAOIFI gives our platform a clear and practical starting point, but the calculation must still be visible. Check the company data date, the market-value convention, who reviewed the result and how often the provider refreshes it.
A stock's status can change after results, price moves or corporate actions. A good platform explains when it screens, how it notifies investors, how it handles purification and what happens after a downgrade.
What this means in practice
- 1Read the screening methodology before relying on a compliance badge.
- 2Confirm the latest review date and the financial period used.
- 3Check the provider's policy for purification and for a stock that becomes non-compliant.
- 4Reassess a holding after material updates rather than assuming a historic screen still applies.