Our Shariah Screening Methodology

Our Shariah Screening Methodology

Updated: 20 November 2021

Screening of stocks at Muslim Xchange (MX) is based on the Shariah standards adopted by some of world’s leading institutions and indices. The business or industry screen is based on what most major Shariah standards agree on. The earlier version of our stock screener followed the standard adopted by the Indonesia Shariah Stock Index. In November 2021, we hired Mufti Talha Ahmad as a Shariah consultant.

Business Screen

We screen out companies in the following types of business

Alcohol

Gambling

Movies, music & related Haraam entertainment

Tobacco

Financials and Insurance

Weapons and Military

Pork and Non-Halal Meat

Recreational Cannabis*

*Recreational Cannabis is legal in countries like Canada. We make an exception for cannabis used solely for medical treatments and research. This exception is based on the fatawa of major scholars and boards around the world.

Impure Income

Most Shariah standards tolerate a 5% impure income limit for companies earning from halal and haram sources. At MX, this 5% limit includes interest income. According to the standards adopted at the S&P and DJIM, the 5% limit excludes interest income.

Financial Ratio Screen

AAOIFI, FTSE and DJIM

In this screen, we check based on three different criteria:

FTSEAAOIFIDJIM
Debt / Assets < 33%Debt / Market cap < 30%Debt / 24-mo. avg. Market cap < 33%
Cash and Equivalents / Assets < 33%Cash and Equivalents / Market cap < 30%Cash / 24-mo. avg. Market cap < 33%
Cash + Accounts Receivables < 50%AR / 24-mo. avg. Market cap < 33%

If the stock passes either of the three criteria, it is marked as a PASS. We also include a ranking system wherein, for example, a stock that passes all three criteria is marked with three stars.

Shariah Consultant

Mufti Talha Ahmad Azami

In November 2021, we hired Mufti Talha Ahmad Azami as our Shariah consultant. Based on his guidance, we upgraded our screener and implemented the standards followed by the world’s leading institutions.

Mufti Talha is an expert in this field with over 15 years of experience at Islamic banks and financial institutions. He has acquired traditional Islamic knowledge from leading institutions in India and studied business and finance at world-class universities. To know more about him, please visit his LinkedIn profile.

Limitations and Disclaimer

One of our current limitations is that we assume debt in non-Muslim countries is interest-based. If a company has interest-free debt, then our screener will not differentiate. No work is without error and we are always a work in progress. Please check with a Shariah advisor before making an investment. We welcome your feedback, questions, and criticisms. Jazaakumullahu khairan!


Responses

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  1. AsA, I see an overwhelming amount of brothers in the West trading options. What is your viewpoint on this?

      1. I have pre selected mutual funds through my jobs 401k plan. I have selected 100% stock fund with no bonds. What can I do with the percentage of non halal companies the mutual fund is invested in?

        1. It’s better to put this question to a scholar, to be honest brother. Jazaak Allahu khairan!

  2. Assalamo alaikum Br Faraz,
    Jzkl khair an for this great tool!

    The members of the Sisters Trading Community in Canada are very excited to use the screener. We love the detailed information and the layout and interface also look great alhd.

    Two questions came up from the group, will you be adding UK tickers to the screen and are there any plans for MX to be offered as an App?

    Jzkl khairan for your hard work, may Allah SWT reward you for your service.

    1. Walaikum assalaam wa rahmatullah Sr Ayesha,
      Aameen, thank you so much! Jazaakumullahu khairan! Yes, in sha Allah, we will be adding more markets in the coming months, starting with Canada and UK, and mobile apps as well. Alhamdulillah really happy to hear your feedback.

    2. Assalamu alaikum, May I know how one can join the sisters trading group?

  3. Above states “We check the stock’s debt against three screens: Debt to Assets < 33%, Debt to Assets < 45% and Debt to Market Cap <33%. The Financial Ratio is considered a PASS if the numbers clear either of these conditions. "

    Sorry if I'm being dumb but I don't get that…why not just say Debt to Asset < 45% and Debt to Market Cap < 33%?
    i.e. leave out the Debt to Assets <33%.

    Because if it's 33.1% Debt to Assets it will pass. Or am I missing something?!

    1. Ah ok figured it out sorry.
      It’s either
      A) Debt to Assets < 33% OR
      B) Debt to Assets < 45% AND Debt to Market Cap <33%

      1. You’re first inference was right brother. The stock has to clear either of the three. Certainly it’s kind of redundant when you say 33% and 45%. But we have that in place because many Standards are around 33% with the exception of the Indonesian one at 45%.
        So just pointing it out that this particular stock either passes all three types or only two or only one.

        Just additional info for investors to help in their decision making.

  4. It is really a very good initiative, in sha Allah might be a helpful tool for many Muslims across the globe. May Allah SWT guide and bless you for all the hard work.

  5. Salaam.

    Just to be clear, I can create a company with $1million of capital investment and then take on $300,000 conventional interest bearing loan from the bank and then start selling shares in my company and I’m Islamic?

    1. Walaikum assalam wa rahmatullah brother,

      If your business is not “dodgy”, then Shariah-compliant, yes. Islamic, no 🙂 Please have a look at this article to understand the background and reasoning for why scholars have approved it.

  6. Assalam-o-Alaikum brother, Jazakallah for the effor. There is a great need for such Sharia compliance screeners for ETFs as well. If you can kindly look into it as well, it will be a great service for the community.

    1. Walaikum assalam wa rahmatullah brother,
      Jazaak Allahu khairan for your comment. Will try in sha Allah

  7. Asalamualaikum Br Faraz,

    Jazakallahu Khayr for developing this application. I have a question. I currently reside in North America and usually trade on USA stocks. I see that few of the stocks that I usually trade on are shown compliant over here but on other apps it’s shown as Non Compliant. Could you please clarify on this matter? Thank you for the keeping service as free. 🙂

    1. Walaikum assalam wa rahmatullah brother,

      Baarak Allahu feek. Thank you for kind comments. There may be more than one reason why this may happen. The Shariah screening methodology may be different in the other apps. It is best if we know the reason why a stock has been labeled non-compliant and then perhaps we can compare and provide a clear explanation 🙂

      1. Dear Brother Faraz,

        as salamu alaikum wa Ramadan Karim,

        Mabruk to your easy to use tool. Which market cap you use, last day, at reporting time of the financials or any smoothening method? A lot of differences can be explained by that.

        I added your website to the names of screening tools. Myself did an open source google sheet to calculate AAOIFI debt and liquidty filter plus zakat for investors based on zakatable assets method.

        Please join my telegram group on Islamic Stock Screening: https://t.me/islamicstockscreening

        All the best,
        Michael

        1. Walaikum assalam wa rahmatullah brother Michael

          Welcome to MX! Happy to hear your comments, alhamdulillah, jazaak Allahu khairan!

          Yea, we’re using last reported for market cap and we update every month. In sha Allah we are also considering if a 12-month avg would be better, but there’s pros and cons.. Allahu Alam

  8. السلام عليكم ورحمة الله وبركاته
    One thing that I would like it to be addressed is “Purification” , I know purity on Dividends is due, but what about on profits made from stocks.
    I mean, one earns profit from buying and selling stocks as an active trader and doesn’t not hold stocks longer then a week or month.
    The Aim is to make active Income from trading. So in this case does one has to purify their earnings, if yes, then at what percentage ? .

    جزاكم الله خيرا

    1. Walaikum assalamk wa rahmatullah wa barakatuh,

      Apologies for the late reply. Regarding profits from stock trading, there is a difference of opinion among scholars if one needs to purify capital gains. While some scholars say we must purify capital gains as well, many scholars say it is not necessary to do this because it is not possible to calculate the small % of the haraam portion in the share price, when the majority of the company’s assets are halal. Allah knows best.

    2. Mostly Dividend is suggested to be purified, you may consider the higher Earnings per Share, which can be found easily and calculate the 5% on that. This should be covering the aspect sufficiently inshallah.

      Capital Gains are mostly not considered and as a trader you pay already full rate of 2.5% Zakat for trading goods.

  9. Salaam.
    Very nice website. Found through google. Allah make you successful and jazakAllah for this website. Please include UK stocks FTSE 100/250 and AIM stocks.

    1. Walaikum assalam wa rahmatullah,

      Thank you and welcome to MX! In sha Allah we will in the coming months 🙂

  10. As salam alaikum Brother Faraz, great work MashaAllah. May Allah SWT reward you immensely, ameen. I couldn’t find some tickers eg. SLGG, UVXY, TZA. Would you kindly be able to add them as well. JazakAllahu khairan.

    1. Walaikum assalam wa rahmatullah brother,

      Ameen, jazaak Allahu khiaran. In sha Allah an update is overdue!

  11. Can you guys please add otcs again. I use it as a general reference in order to decide whether it’s halal. The information needed to determine if a otc is halal is all on otc market.com. That’s has the most up to date description along with financials.

    1. Assalamu alaikum brother,
      OTC’s QX and QB US are available. International and Pink aren’t. We excluded Pink because of the limited information and regulation, even according to the OTC Markets itself. Quoting from their website:

      The Pink Open Market provides brokers a platform for transparent trading and best execution in any security. There are no financial standards or disclosure requirements. A wide spectrum of companies are traded on this market, including foreign companies that limit their disclosure in the U.S., penny stocks and shells, as well as distressed, delinquent, and dark companies not willing or able to provide information to investors.

      OTC Markets Group segments Pink companies based on the information they provide to investors into Current, Limited or No Information. Companies can make disclosure available pursuant to one of the following Reporting Standards:

      Filing required reports with the SEC, U.S. Bank Regulatory Authority, or home country if listed on a Qualified Foreign Exchange

      Companies that do not meet one of the above standards can provide disclosure to investors directly to http://www.otcmarkets.com via the Alternative Reporting Standard

      The Pink Market is for professional and sophisticated investors with a high risk-tolerance for trading companies with limited information available and limited regulatory oversight. Investors are strongly advised to proceed with caution and thoroughly research companies before making any investment decisions.

      We found that many companies provided false/misleading/incorrect descriptions to their actual business activity. This makes it impossible to give accurate screening results unless we manually investigate the thousands of companies listed in the Pink market.

  12. CGIX merged and changed its name to VYNT. If you could kindly update that. JazakAllahu khair.

  13. I like the science behind your screener, but some of the compliant stocks are not tayyeb. It’s the equivalent of eating halal versus “organic” halal. The companies may have good leverage but their non-Islamic mission automatically rules them out as halal (ie: Pfizer/Moderna [harmful ineffective genetically-modifying mRNA vaccines], Tattoed Chef [harmful pea protein], Microsoft [Bill Gates!] and so forth. You are gleaning stocks in terms of their mixed assets but the halal nature of the investment is IMPORTANT. We must strive not to invest in things that are destroying mankind, for some of these imposters will reflect as shariah-compliant with impressive debt-to-equity ratios and be ultimately haraam. And Allah Knows Best!

  14. Masha Allah!, what a wonderful effort !
    Everyone really needed a site like this
    Thank you to all the brothers involved in the project and I hope you will continue to develop it
    I wish you guys good luck

  15. Dear MuslimXchange,

    Thank you for such a good and free to use website and Data, may Allah give you ajar.

    I am curious to know whether do you have any scholars in your screening committee, can you share information about your screening committee.

    Amin Khan

    1. Aameen, jazaak Allahu khairan. We consulted scholars and reviewed the rules while building it. We do not have an official shariah board at present but are working on it and hopefully we’ll have one soon in sha Allah.

  16. It would be great if you could provide lists with complaint stocks, within each category.

    What I mean is, let’s say you would have one list called semiconductors, all the complaint stocks under that category would be listed. Same for Online Services, REITs etc.

    Let’s say I would like to invest in REITs, this would allow me to see all the companies I can invest in

  17. Assalamualaikum MuslimXchange,
    I’m so glad for finding this page and thanks to everyone involved in this screener and shariah assessment
    All the company I want to search were available in this page, however I can’t find NEWEGG COMMERCE, INC (NEGG)
    Please advice

    1. Walaikum assalam wa rahmatullah
      Jazaak Allahu khairan brother. In sha Allah we’ll be adding more stocks very soon.

  18. Walaikum assalam wa rahmatullah brother
    Alhamdulillah, jazaak Allahu khairan. In sha Allah we’ll be adding more features soon and releasing an app as well.

  19. Assalam alaikum!
    could the brothers analyze Russian stocks?
    Great site! may Allah strengthen you on the way

  20. Assalamu alaikum,

    I wondered if the Nintendo stock is halal regarding business numbers.
    Also i read Nintendo wants to start a theme park and make movies about their characters like Seuper Mario.
    The question ist will the stock become haram then or must be checked if the movies are including haram ?

  21. Assalamu alaikum Warahmatullahi wabarakatuhu,

    my Name is Bilal and im from germany.

    I wanted to ask if you can add the following Stocks to this website and to see if they are okay to invest in:
    Snowline Gold (SNWGF) WKN: A2QQBD ISIN: CA83342V1040
    MMC NORILSK NICKEL PJSC (NILSY) WKN: A2DHRG ISIN: CA49741E1007
    Impala Platinum Holdings WKN: A0KFSB ISIN: ZAE000083648
    Energy Fuels Inc. (UUUU) WKN: A1W757 ISIN: CA2926717083 (I did find it on the Website but there wsnt enough information if it is Halal or not.)

    I thank you very much for making these Matters easier for the ummah to reasurch throu you.
    I would love to support you in any way possible. if there is a way i could support this Website Please let me know.

    Jazakallahu Khairan
    Bilal Shaikh

    1. Walaikum assalam wa rahmatullah wa barakatuh Brother Bilal

      Welcome and jazaak Allahu khairan for your kind comments! in sha Allah we’ll try to check. We’ll have an update soon in sha Allah in which there will options for paid add ons/subscription. Just remember us in your du’aas brother! Thank you very much.

  22. Salam Aleykum.

    I wanted to know how often you update the compliance of the stocks?

    I.e.
    $BBIG shows here as compliant, whereas in Zoya it shows as non compliant, and i am stuck tbh.
    Thank you.

  23. Assalamu alaikum, hope you’re well.

    On what basis can anyone in the world legalize stock trading when there is as stated: “Debt to Assets < 33%, Debt to Assets < 45% and Debt to 12-month Average Market Cap <33%."

    What Islamic source is this based from? The salafi scholars have said that it isn't allowed at all to invest in companies with interest bearing loans (regardless the percentage).

    Jazakum Allahu Khairan

  24. (apologies, reposting this same post so that I get notified by email if someone replies. please ignore previous post. thanks)

    Assalamu alaikum, hope you’re well.

    On what basis can anyone in the world legalize stock trading when there is as stated: “Debt to Assets < 33%, Debt to Assets < 45% and Debt to 12-month Average Market Cap <33%."

    What Islamic source is this based from? The salafi scholars have said that it isn't allowed at all to invest in companies with interest bearing loans (regardless the percentage).

    Jazakum Allahu Khairan

  25. Even if you are switching to AAOIFI, can you still keep the ISSI criteria available to be seen for the stocks on your website? You are the only site who have been using them, they are more reasonable in my opinion.

    1. hmm.. well, if there are enough people asking for it, then we can in sha Allah. And we are not just moving to AAOIFI, we will have multiple standards including AAOIFI so you will get that combined flexibility in sha Allah.

      1. Thank you Sheikh. I think it would be of benefit to people still following that methodology, and whatever effort you put forth would be greatly appreciated.

  26. Peace upon You,

    Is MAERSK B A P MOLLER MAERSK B Industrials Equit a Hallal stock, please?

    Allah bless You