Screening stocks: business first, then the ratios
After this lesson you can screen a company in two steps, business activity and the AAOIFI 30/30/5 ratios, and explain why two halal screeners can disagree about the same stock.
Stocks ki screening: pehle karobar, phir ratios
Share khareedna ek asli karobar ka hissa khareedna hai, is liye pehla sawal yeh hai ke company karti kya hai. Conventional bank, insurance, sharab, jua ya sood par qarz dene wali company pehle hi qadam par bahar ho jati hai. Phir numbers dekhe jate hain, kyun ke taqreeban har company ka bank ke saath kuch na kuch sood wala taluq hota hai.
AAOIFI Standard 21 ke mutabiq teen ratios hain: sood wala qarz market cap ke 30% se kam, sood wale deposits 30% se kam, aur haram income total income ke 5% se kam. PSX ka KMI-30 qarz ko total assets ke muqable mein dekhta hai, 37% ki hadd ke saath, aur non-compliant income 5% se kam. Yeh index saal mein do dafa badalta hai.
Is liye mukhtalif screeners ka faisla mukhtalif ho sakta hai: koi market cap se taqseem karta hai, koi total assets se. Share ki price gire to market cap wala ratio bhi badal jata hai. Ek tareeqa chunein jo aapke aalim ko qabool ho, usi par qaim rahein, aur har quarter dobara check karein.
- Pehle company ka karobar dekhein, ratios baad mein.
- AAOIFI 30/30/5 market cap par chalta hai, KMI-30 total assets par.
- Screener shopping na karein; ek tareeqa chunein aur usi par qaim rahein.
Poora sabaq neeche English mein hai. Quiz English mein hai; asaan alfaaz mein.
Ayesha, a schoolteacher in Karachi, wanted to put part of her savings into shares instead of leaving it idle. A colleague told her a big PSX cement company was 'obviously halal, it makes cement'. One app on her phone showed the same stock as non-compliant. A website listed it as compliant but with a note about purification. Ayesha felt it was all guesswork and nearly gave up. It is not: each screener applies clear rules, just slightly different ones.
Step 1: what does the company actually do?
The first screen is the core business. A company whose main activity is conventional banking or insurance, alcohol, pork, gambling, adult entertainment or interest-based lending is out, however good its numbers look. Many screeners also exclude tobacco, and some exclude weapons or certain media. This step is about what the company sells and how it earns, not who its customers are.
Most real companies are mixed. A cement maker may keep cash in a conventional bank and earn interest on it. A technology company may earn a little from activities you would not approve of. That is why a second, numerical screen exists: it asks whether the impermissible part is small enough to tolerate and then purify.
Step 2: the AAOIFI 30/30/5 ratios
AAOIFI Shariah Standard 21 on shares is the reference most global screeners start from. It does not demand a perfect company; it sets limits on how much contact with interest and impermissible income can be tolerated. A company passes the financial screen only if all three tests hold at the same time. Failing any one of them means it fails.
- Interest-bearing debt is less than 30% of market capitalisation.
- Interest-bearing deposits and securities are less than 30% of market capitalisation.
- Impermissible income is less than 5% of total income.
The KMI-30 rules on PSX
The PSX KMI-30 index is Pakistan Stock Exchange's Shariah index. Its Shariah advisors check the core business and then financial ratios, for example interest-bearing debt below 37% of total assets and non-compliant income below 5% of revenue, along with further tests on non-compliant investments and on how much of the company is real, illiquid assets rather than cash. The index is recomposed twice a year, so companies can enter or leave it.
If a PSX stock is in the KMI-30, a qualified team has screened it. If it is not, that does not automatically mean it fails; the index holds only 30 companies, so many compliant ones are simply too small to be included.
Why screeners disagree
Two careful screeners can give different results on the same day. Nobody is lying; they measure differently, as the list shows. The fair response is to choose one method your scholar accepts, apply it consistently and recheck it each quarter when new figures come out.
- Denominator: AAOIFI divides by market cap, KMI by total assets.
- Threshold: some use 30%, others 33% or 37%.
- Timing: last quarter's balance sheet, last year's, or a price average.
- Business tolerance: whether tobacco or some media counts as excluded.
- Market moves: a market-cap ratio can flip when the share price falls.
One company, two screens
Suppose a PSX company has total assets of Rs 100 billion, interest-bearing debt of Rs 30 billion and a market cap of Rs 80 billion. KMI-style test: 30 / 100 = 30%, below 37%, pass. AAOIFI test: 30 / 80 = 37.5%, above 30%, fail. Same company, same day, different result.
If its share price then falls 20%, market cap becomes Rs 64 billion and the AAOIFI debt ratio rises to 30 / 64 = about 46.9%. The business did not change; the ratio did.
A US company: market cap $50 billion, interest-bearing debt $12 billion (24%, pass), cash and interest-bearing securities $17 billion (34%, fail), interest income $0.6 billion out of $20 billion total income (3%, pass). One failed ratio means it fails the AAOIFI screen.
Owning shares means owning a slice of a real business, which fits the trade Allah has permitted (Quran 2:275) as long as the business is lawful. AAOIFI Shariah Standard 21 accepts that almost every listed company has some contact with interest, so it sets tolerance limits rather than demanding perfection, with purification of the small impermissible income. Some scholars are stricter and avoid any company with interest-bearing debt; others accept the ratios. The PSX KMI-30 index applies its own limits. Choose a method with a qualified scholar you trust.
Education, not a fatwa. Where scholars differ, we say so. See what scholars say.
The common mistake is screening once and forgetting. Ratios change every quarter, the KMI-30 is recomposed twice a year, and a price crash can push a market-cap ratio over the line. The second mistake is screener shopping: when one method fails a stock you like, you search until another passes it. That turns a Shariah screen into a sales tool for your own nafs.
Open the Stocks desk and use the Screening calculator with the worked example: market cap Rs 80 billion, interest-bearing debt Rs 30 billion, total assets Rs 100 billion (enter 0 where you have no figure). See which test fails and which passes, and why the two methods disagree. Then open LUCK on the Pakistan KMI-30 tab and read its Shariah panel: Barqish relies on the index's own screening there instead of recomputing ratios.
Open screening calculator →Key takeaways
- Screen the business first; the ratios only matter when the core activity is lawful.
- AAOIFI uses 30% debt, 30% interest-bearing deposits and 5% impermissible income, while KMI uses total assets and different limits.
- Screeners differ in method, so choose one your scholar accepts and recheck it every quarter.
Check yourself
Pass with 2 of 3 to complete the lesson. Answers are checked on our server, so the certificate means something.
Barqish is an educational platform. Nothing here is financial advice or an instruction to buy or sell, and screening is not a fatwa. Spot ownership only: no leverage, no short selling. Updated 30 September 2026.