Our Screening Methodology

Two-Stage Screening Process

Automated ratios are only one part of Shariah screening. Business activities, subsidiaries, mixed revenue and scholarly judgment require qualified human review; this site does not determine that a security is halal.

1Stage 1: Business Activity Screening determines whether a company's core business involves activities that are impermissible (haram) in Islam. If a company's primary revenue comes from a prohibited industry, it fails immediately and no further financial analysis is performed.

2Stage 2: Financial Ratio Screening evaluates the company's balance sheet to ensure its debt levels, cash holdings in interest-bearing instruments, accounts receivable, and income from impermissible sources all fall below the thresholds set by each Shariah standard.

Stage 1: Business Activity Screening

A supplied prohibited-sector classification produces a potentially non-compliant indicator. Sector labels can be incomplete, so users must verify actual business activities and revenue segments.

Excluded Sectors and Activities

Our automated business screen starts with supplied sector and industry classifications. Mixed activities, subsidiaries and revenue segments remain under activity assessment. A supplied prohibited-sector classification triggers a business-exclusion flag.

Stage 2: Financial Ratio Screening

Companies that pass the business activity screen are then evaluated against four financial ratios. These ratios ensure that a company's financial structure does not rely excessively on debt, interest-bearing instruments, or impermissible income. Different standards use slightly different thresholds and denominators.

The Four Key Ratios

1. Debt Ratio — Total interest-bearing debt divided by the denominator (market capitalization or total assets). Measures how leveraged a company is with conventional debt.
2. Cash & Interest-Bearing Securities Ratio — Cash and short-term investments held in interest-bearing instruments divided by the denominator. Ensures the company does not hold excessive interest-generating assets.
3. Receivables Ratio — Accounts receivable (and sometimes cash) divided by the denominator. Limits exposure to debt-like instruments on the balance sheet.
4. Impermissible Income Ratio — Revenue from haram activities (interest income, alcohol sales, etc.) divided by total revenue. All five standards agree this must be below 5%.

Thresholds by Standard

The following table shows the thresholds used by our five indicative models. Passing these automated ratios does not constitute an official determination by the named institution.

How We Calculate Each Ratio

For full transparency, here is exactly what we use in each calculation:

• Total Debt: Long-term debt plus current portion of long-term debt from the balance sheet (interest-bearing obligations only).
• Cash & Interest-Bearing Securities: Cash and cash equivalents plus short-term investments. This captures funds held in conventional interest-bearing accounts.
• Accounts Receivable: Net accounts receivable as reported on the balance sheet.
• Impermissible Income: Interest income and other non-operating income from haram sources, divided by total revenue.
• Market Capitalization: Current share price multiplied by total shares outstanding (trailing 12-month average or most recent).
• Total Assets: Total assets as reported on the most recent balance sheet.

Data Sources

We source our financial data from multiple publicly available databases to ensure accuracy and coverage across global markets.

Update Frequency

Accuracy depends on timely data. Here is how often we update each type of information:

• Financial statements: Updated when new quarterly (10-Q) or annual (10-K) reports are filed, typically within days of public release.
• Historical market capitalization: selected U.S. issuers have a provisional 36-month reconstruction from Nasdaq month-end closes and SEC share evidence. Missing months never fall back to spot capitalization.
• Business screening: Sector classifications and haram activity flags are reviewed and updated as companies change their business models or enter new markets.
• New stocks: We regularly add newly listed companies and expand our coverage to additional exchanges.

Implemented methods and primary sources (verified 21 July 2026)

Meaning of a result: a reproduction of published numerical screens using the fields we possess. It is neither official index membership, a certification, nor a fatwa. Business-revenue classification and committee judgment cannot be fully automated from a sector label.

MSCI Islamic Index Series — April 2024

Implemented as the new-inclusion, total-assets series: debt/assets ≤30%; (cash + interest-bearing securities)/assets ≤30%; (receivables + cash)/assets ≤30%. The separate prohibited-activity test is below 5% of total income; without segment-level prohibited-revenue evidence, the activity assessment remains pending. MSCI also publishes incumbent thresholds of 33.33%, and an M-Series using average month-end issuer market capitalization over up to 36 months; we do not substitute spot capitalization.

Official MSCI Islamic Index Series Methodology (PDF)

FTSE Yasaar — Ground Rules v4.6, February 2026

Implemented numerical proxy: debt/assets <33.333%; cash and interest-bearing items/assets <33.333%; (receivables + cash)/assets <50%; non-permissible plus interest income/revenue ≤5%. FTSE states that Yasaar applies proprietary screens and its Shariah Board reviews additions, so our output is explicitly not an FTSE/Yasaar decision.

Official FTSE Yasaar Ground Rules (PDF)

Dow Jones Islamic Market — February 2026

The published financial formula is interest-bearing debt / trailing 24-month average market capitalization <33%. Non-permissible revenue plus all interest income must be below 5% of total business revenue. Until verified monthly issuer-cap history exists, the result is “insufficient data”; current market cap is never substituted.

Official Dow Jones Islamic Market Indices Methodology (PDF)

S&P Shariah — May 2026

The current compliance ratio is debt / 36-month average market value of equity <33%. The 5% business-income test includes prohibited operating revenue and interest income. Dividend purification is reported separately by S&P and is not a compliance ratio. A missing 36-month denominator yields “more financial data needed”. The leverage result is shown separately from the still-pending activity-income assessment.

Official S&P Shariah Indices Methodology (PDF)

AAOIFI

Not implemented. The complete primary standard is licensed and an AAOIFI-style internet summary is not enough to claim faithful implementation. This method remains disabled until the licensed text and a qualified Shariah reviewer validate the rules and accounting-field mapping.

AAOIFI official Shari'ah Standards catalogue

Limitations and Important Disclaimers

While we strive for the highest accuracy, there are inherent limitations to any automated screening process:

• Automated screening cannot capture every nuance. Some companies may have subsidiary activities that are not reflected in their primary sector classification.
• Financial data relies on what companies report. Off-balance-sheet items, unreported activities, or delayed filings can affect accuracy.
• Market capitalization fluctuates daily. A stock that passes screening today may fail tomorrow if its share price drops significantly (increasing the debt-to-market-cap ratio).
• Our screening is algorithmic. It does not replace the judgment of a qualified Islamic scholar who may consider additional factors beyond the standard financial ratios.