For Muslims looking to grow their wealth while staying true to their faith, investing in halal stocks is a crucial consideration. But how can you be sure a stock is Shariah-compliant? What defines a stock as Shariah-compliant or Shariah-Non compliant?
This article will walk you through two ways to screen stocks for halal compliance: manually using Islamic financial principles, and using dedicated screening apps/tools that simplify the process.
đź“Ś What Makes a Stock Halal?
Before we dive into screening methods, let’s quickly outline the two main criteria used to determine if a stock is halal:
- Business Activity Screening – The company must operate in a permissible (halal) industry. Activities involving alcohol, gambling, mixed businesses, conventional banking, pork, adult entertainment, or weapons are strictly haram.
- Financial Ratio Screening – Even if a business is halal, its financial dealings must also comply with Shariah. This typically involves limits on:
- Debt: Interest-bearing debt must be below a specific threshold (e.g., 30% of market cap or total assets).
- Interest Income: Non-operating interest income must be minimal.
- Liquidity Ratios: Some scholars apply rules to cash and receivables.
🔍 Method 1: Manual Screening (DIY Approach)
For those who want to dig deeper, here’s a simplified process to manually screen a stock for halal compliance:
Step 1: Check the Business Sector
- Visit the company’s website or financial sites like Yahoo Finance or Google Finance.
- Read its description and revenue sources.
- Eliminate stocks involved in haram sectors (alcohol, gambling, interest-based finance, pork, etc.).
Step 2: Analyze Financial Ratios
You can get this information from the company’s annual report or financial data platforms.
Apply common Shariah screening criteria:
- Debt to total assets or market cap < 30%
- Cash + interest-bearing securities < 33%
- Interest income < 5% of total revenue
These benchmarks may vary slightly based on the scholar board or screening standard used (AAOIFI, DJIM, MSCI Islamic, etc.).
Step 3: Purify Non-Compliant Income
If the company has a small portion of non-compliant income (e.g., interest), calculate your share and donate it to charity. This process is called purification or purging.
📱 Method 2: Using Apps and Screening Tools
For those who prefer ease and automation, many tools and platforms help screen halal stocks in seconds. Here are some popular ones:
1. Musaffa App
- User-friendly app for global halal stock screening.
- Covers U.S., Canada, India and many other countries.
- Offers stock breakdowns and a “purify” calculator.
- Available on iOS and Android.
2. Islamicly
- Real-time Shariah compliance status for global stocks.
- Backed by qualified Shariah scholars.
- Includes portfolio tracking and alerts.
- Paid and free versions available.
3. Islamic Stock (Shariah Stock Screener) For Indian Markets only.
Screening & Purging  services are free of cost.
More suitable for individual investors.
Offers compliance reports in premium version.
Bonus Tips
Combine both approaches—use tools for convenience, and manual checks for added confidence.
Follow a certified Shariah board or scholar for up-to-date guidelines.
Recheck compliance periodically, as companies can shift their activities or financial structure.
Investing in halal stocks is not just about profits—it’s about aligning your wealth-building journey with your faith. Thanks to a growing ecosystem of tools and increased financial awareness, screening for halal investments has never been easier.
Whether you’re a seasoned investor or just starting out, take the time to ensure your portfolio reflects your principles. After all, barakah (divine blessing) comes not just from how much you earn, but how purely you earn it.
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