How Islamic stock screening works
A share is a slice of a real business. Screening asks two questions in order: what does the business do, and how is it financed? Banks, insurers, alcohol, gambling, pork, tobacco and adult content fail the first question before any number is checked.
The second question is about numbers. AAOIFI Shariah Standard 21 allows a limited amount of interest inside an otherwise permissible company: interest-bearing debt below 30% of market cap, cash and interest-bearing securities below 30% of market cap, and impermissible income below 5% of total income.
The Pakistan Stock Exchange's KMI-30 uses six tests measured against total assets instead of market cap, including debt below 37% and non-compliant investments below 33%. Different denominators are why two screeners can disagree about the same stock.
- Compliant: activity passes and every ratio is inside its limit.
- Questionable: activity needs review, or a ratio could not be checked from the filings.
- Non-compliant: the activity fails or a ratio is over the line.
Purification comes last. If 1% of a company's revenue was interest, many scholars advise giving away 1% of your dividend, with no intention of reward. Barqish shows the figure; your scholar confirms the method.
The reading (Favourable, Neutral, Cautious) is a separate question about market conditions. A compliant stock can read Cautious; a non-compliant one can read Favourable. Only the screen decides whether you may hold it at all.
Open Stocks on the desk, read AAPL, and find the three AAOIFI ratios and their source date.
Open →Test yourself
A software company has 2% debt to market cap but earns 8% of its income from interest on cash. Under AAOIFI 21 it is:
- Compliant, debt is tiny
- Non-compliant, interest income is over 5% ✓
- Compliant if the share price rises
- Questionable only
Each limit stands alone. Impermissible income above 5% of total income fails the screen regardless of the other ratios.
Why can two screeners disagree on the same stock?
- One of them is lying
- They use different denominators and thresholds, such as market cap versus total assets ✓
- Stocks change every second
- Screening is random
AAOIFI measures against market cap; the KMI-30 measures against total assets with different limits. Same company, different yardstick, sometimes a different result.
A stock is compliant and reads Cautious. What does that mean?
- Sell it immediately
- It is no longer halal
- It may be held; market conditions are weak right now ✓
- The screen was wrong
The screen decides permissibility, the reading describes conditions. Cautious is a description, not an instruction.
Roman Urdu mein parhein: Islami stock screening kaise hoti hai
Share ek asal business ka hissa hai. Screening do sawal tarteeb se poochti hai: business karta kya hai, aur uski financing kaise hai? Bank, insurance, sharab, jua, khinzeer, tambaku aur fahash content pehle sawal par hi fail ho jate hain, koi number dekhe baghair.
Doosra sawal numbers ka hai. AAOIFI Shariah Standard 21 ek jaaiz company ke andar thora sood bardasht karta hai: sood wala qarz market cap ke 30% se kam, cash aur sood wali securities market cap ke 30% se kam, aur najaaiz income total income ke 5% se kam.
Pakistan Stock Exchange ka KMI-30 chhe tests istemal karta hai jo market cap ke bajaye total assets par naape jate hain, jaise qarz 37% se kam aur non-compliant investments 33% se kam. Alag denominator hi wajah hai ke do screeners ek hi stock par ikhtilaf kar sakte hain.
- Compliant: activity pass aur har ratio apni had ke andar.
- Mashkook: activity ko review chahiye, ya koi ratio filings se check nahi ho saka.
- Non-compliant: activity fail ya koi ratio had se bahar.
Tazkiya aakhir mein aata hai. Agar company ki revenue ka 1% sood tha, to aksar ulama kehte hain apne dividend ka 1% bina sawab ki niyyat ke sadqa karein. Barqish figure dikhata hai; tareeqa aap ka aalim tasdeeq kare.
Reading (Saazgaar, Mutawassit, Ehtiyaat) market ki halat ka alag sawal hai. Compliant stock Ehtiyaat parh sakta hai; non-compliant Saazgaar. Sirf screen tay karti hai ke aap usay rakh bhi sakte hain ya nahi.
Aham baat: Pehle business screen karein, phir numbers, phir tazkiya. Reading kabhi screen ki jagah nahi leti.
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