Shariah Screening Explained

Shariah screening is the process of evaluating whether a company's stock is permissible for Muslim investors. Three globally recognized methodologies are used: 1. S&P Shariah Indices — Uses 36-month average market cap as the denominator for financial ratios. Thresholds: debt < 33%, receivables < 49%, cash + interest-bearing securities < 33%. 2. AAOIFI Standards — Uses total assets as the denominator. Stricter thresholds in some areas. 3. FTSE/Maxis — Similar to S&P but with slightly different sector classifications and ratio calculations. Each stock is tested against 5 key financial ratios plus sector exclusions. A stock must pass ALL criteria to be classified as Halal.