![]() In reality, not all businesses will have 100% halal sources of income, in these common circumstances, the 5% rule will apply, more on that in a bit. Several examples of prohibited business activities include but not limited to buying and selling alcohol, pork, or tobacco, as well as various forms of entertainment such as casinos and nightclubs.īeyond the above list of business activities, there are a few additional business sectors that are not as straightforward and require further analysis to assess Shariah compliance: the financial services and media industries. Business’ that partake primarily in prohibited activities considered as “Haram” or impermissible are unequivocally screened out. The core value of the business must not fundamentally violate the laws of Shariah. The first criteria and often easiest to evaluate is: How does the business make money? The first step of the Shariah stock screen process is to evaluate the nature of the business as discussed below. So, let’s dig right into it and learn more about Shariah stock screening. The DJIM Shariah screening methodology was referenced for this article. There is multiple Shariah stock screening methodologies through the FTSE (Financial Times Stock Exchange Russell), AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) and DJIM (Dow Jones Islamic Market Index). This article will introduce you to Shariah stock screening including a step-by-step guide explaining in detail what is Shariah stock screening methodology followed by a practical example (Tesla). What is considered a halal stock? In short, a stock that is listed on the stock exchange is termed Halal when it meets the Shariah screening criteria derived from the Holy Quran and Sunnah. ![]()
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