Our Shariah Screening Methodology

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. We have been working with a reputed Shariah advisory firm with over 15 years of experience in the field to develop and deliver the best possible Shariah screening of stocks.

Business Screen

We screen out companies in the following types of business

Alcohol
Gambling
Movies & Haram entertainment
Tobacco
Financials
Weapons
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. According to the standards adopted at the S&P, DJIM and MSCI, the 5% limit excludes interest income. However, AAOIFI and FTSE standards include Interest Income. We have updated our screener to include all of these standards.

Financial Ratios

In this screen, we check based on five different criteria as set by AAOIFI, FTSE, DJIM, S&P, and MSCI standards.

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

AAOIFI checks for Non-compliant Debt and Non-compliant Assets against the company’s Market cap. The ratio should not exceed 30%. Impure income (including Interest income) must not be more than 5%. FTSE checks for Debt, Cash, and Cash + Account Receivables against Assets. The ratios must not exceed 33.33% for the first two and must not exceed 50% for the Cash+AR. Impure income limit is similar to that of AAOIFI.

DJIM, S&P and MSCI do not include interest income in the Impure income screen. This is because, since Interest-bearing securities like Cash, already are being screened against. Just as we do not screen for Interest expense because we screen for Interest-bearing debt, why should it be different in the case of Interest income. DJIM checks against a 24-month-average of Market cap, while S&P uses a 36-month average. MSCI checks against Assets like FTSE but also has a tighter measure for Cash+AR, which it only allows at 33.33%. DJIM’s ratios are at 33% for Debt, Cash and AR (separately). S&P’s is similar excepting for AR, their limit is at 49%.

The above Islamic methodologies are explained in the reports issued by the respective standards.

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

      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. السَّلاَمُ عَلَيْكُمْ وَرَحْمَةُ اللهِ وَبَرَكَاتُهُ brother Khalid & others,

          You’re most likely looking to purify your investments and that could be difficult and majority of funds chosen are usually blended funds and they make it difficult to identify the right amount There is a simple way this can be handled.

          You can opt for the self direct option and use a financial advisors assistance to buy sharia compliant stocks in the first place. I’m a financial advisor and would love to help clear up the air with regards to this. You or any other Muslim brother needing advice on investment related is under no obligation to work with me.

          Habib Anwar
          habib@shariaportfolio.com
          9708898812

  1. 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. 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. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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

  7. 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.

  8. 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.

  9. 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.

  10. 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.

  11. 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!

  12. 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

  13. 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.

  14. 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

  15. 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

  16. 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 ?

  17. 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.

  18. 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.

  19. 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

  20. (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

  21. 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.

  22. Does the website has a constant update of the financial data about the companies??, some companies might not be compliant to Shariah but due to its updated financial report it became compliant and vice versa.
    Can I fully rely on this website or should I do my own research ?

  23. AOA, just my 2 cents here and of course Allah swt knows best.

    I have been trading equities many years via futures, futures options, equities and equity options. I used to manage assets professionally.

    Late last year I began to wonder if all this is in line with Islamic principles and began to investigate, this is how I ended up here – subhanallah 🙂

    It is my stance, after all my research and duas, that halal trading vehicles are only certain commodities, such grains and metals. Corn, wheat, soy meal, etc.

    I can certainly explain the specifics, if anyone is interested, but ultimately for me it comes down to how much of the asset class is tied into interest (riba).

    Oil futures are tricky and I am not certain about whether the mechanics are skewed enough to be halal or haram.

    I want to emphasize – this is just my 2 cents.

    Of course I realize that (some?) scholars have decided on the 33% principles underlying the scoring system but to me this percentage seems quite arbitrary neither rooted in Quran, hadith, nor Sunnah.

    Allah swt knows best.

    May Allah swt forgive all the momin and momina.

    Salam.

    1. Salam, just to add here – I think shorting financial stocks (companies taking riba) is also halal (2:276), I have never lost money shorting financial stocks – alhamdulillah rabialamin, mashAllah la quwita illabillah.

      Allah swt knows best.

      Salam.

  24. Asalam alaikum wr wb
    Brother I search stock at your application like manali petrochemical Ltd it show me it is halal complainant as per Muslim Xchange
    But I checked on islamicly application same showing not complaints not permissible to invest
    What can I do for that

    1. The Shariah standards that use this metric (like S&P) have said it must be below a certain level because cash at bank, short-term investments and account receivables often earn interest. Allah knows best

  25. Assalamo alaikum brotherr Faraz,

    First, thank you for your great effort
    My question to you is, in the event that a company only passed one of the five criteria, is it permissible to buy and sell the shares of that company? What are the minimum standards for to buy?

    1. Walaikum assalam wa rahamtullah
      Yes, it should be fine to buy a company that only passes one standard. But you must look into the possibility that the company may go non compliant. If for example it has high debt and is narrowly passing one standard, then tomorrow the company may either add on more debt or if its market cap/assets come down, then it may become totally non compliant. There can be some volatility. But if the company is expected to perform better or reduce its debt, then it may become compliant in more than one standard as well. Due diligence will help understand which direction the company is heading towards.

  26. H, I have noticed that certain halal stock screeners consider stocks to be non shariah compliant even if they fail 3 standards, you on the other hand are deeming a stock as shariah compliant in certain cases where they have passed even a single standard. Is there a logic or reason behind this. Can you share supporting documents based on which you are doing this?

    1. Thank you for your comment. I’m not sure which halal stock screeners approach in this manner. There are hardly one or two screeners that use multiple Shariah standards as of date. Most use just one standard like AAOIFI or S&P.
      In any case, I believe you may be talking about the individual components/criteria of each standard like Debt, cash etc. If any one of this criteria is a fail, then the stock will not be compliant in the standard. Because otherwise the methodology you refer to doesn’t make any sense at all.
      Regardless, our approach is to pass the stock if it passes any of the major standards while showing which ones are compliant and which aren’t. I’m not sure what is not reasonable or logical in this, or what supporting documents are needed for this?

    1. It could be due to the screening methodology they adopt. As you can see, in our screen it does not pass one standard. Most screeners use only one standard to screen stocks.

  27. Assalamu alikom,
    1- If the stock passed in one or two standards, can I invest my money in it and consider it as Halal stock ?
    2- And what is the most important standard I can depend on when I choose my stock to invest ? Is it AAOIFI standard?
    3- is there a purification ratio if the stock didn’t pass the five standards? And if there is a ratio, how can I calculate this ratio?

    1. Walaikum assalam wa rahmatullah,
      1. Yes you can, if you are okay with following any of the 5 Shariah standards.
      2. The most important standard is the standard that you find to be the best and want to follow. Each of these 5 standards are major and globally accepted ones.
      3. Purification is only for dividends. We currently do not have a purification calculator. In sha Allah, we’ll incorporate it soon.