Islamic stock screening, explained in plain language.
How scholars decide whether a share is permissible, why screeners disagree, what purification means, and how Barqish reads 36 US stocks and the 30 companies of the PSX KMI-30 on one desk. Education, not advice.
1. Two questions every screen asks
A share is a slice of ownership in a business. So the first question is simple: what does the business do? Companies whose core activity is conventional banking or insurance, alcohol, gambling, pork, tobacco, weapons or adult entertainment are excluded before any number is looked at. Most technology, healthcare, energy, consumer and industrial companies pass this stage; a company with a permissible core business but a small impermissible line (an airline serving alcohol, a retailer selling tobacco) is usually treated with the income limit below.
The second question is how is the business financed? Almost every listed company borrows on interest and earns some interest on its cash. Scholars tolerate a limited amount because it is incidental to a permissible business and hard to avoid, but they draw lines. Cross a line and the stock is non-compliant until the balance sheet changes.
2. The AAOIFI limits, and why screeners disagree
| Ratio | AAOIFI Standard 21 | PSX KMI-30 | Some index providers |
|---|---|---|---|
| Interest-bearing debt | below 30% of market cap | below 37% of total assets | below 33% of market cap (often a 36-month average) |
| Cash and interest-bearing securities | below 30% of market cap | non-compliant investments below 33% of total assets | below 33% of market cap |
| Impermissible income | below 5% of total income | below 5% of revenue | below 5% of revenue |
| Extra tests | — | illiquid assets at least 25% of assets; price at least net liquid assets per share | varies |
The denominators matter. Measuring debt against market capitalisation means a rising share price can make a company look cleaner without its debt changing; measuring against total assets is steadier but stricter for asset-light companies. That is why one screener can mark a stock compliant while another marks it questionable. Barqish shows the AAOIFI ratios for its US list, and for Pakistan relies on the KMI-30 methodology certified by the exchange’s Shariah advisors, with its screening calculator supporting both sets of limits.
3. Purification
If a compliant company earned, say, 1% of its revenue as interest, a common view is that 1% of any dividend (and, by some opinions, of any capital gain) should be given away with no expectation of reward. Barqish displays the interest-income-to-revenue figure for US stocks from the latest annual filing, and the screening calculator returns a purification percentage for any company whose numbers you enter. Scholars differ on whether gains, not just dividends, need purifying; ask yours.
4. How Barqish reads a stock
- Screening first. Business activity, then the three AAOIFI ratios from the company’s own SEC filings and today’s market cap. Compliant, Questionable (a ratio could not be checked or the activity needs review) or Non-compliant.
- Then the reading. The same three-step scale as the crypto desk: Favourable when price is above its long-term averages in a calmer area, Neutral when signals are mixed, Cautious when price sits below its averages or swings are large. Every reading lists its drivers.
- Pakistan. The KMI-30 companies with delayed PSX quotes, end-of-day history and the same reading. Membership of the index is the screen; Barqish does not recompute the KMI ratios.
- Never a recommendation. The reading says nothing about valuation, your goals or your risk. It is a description you can learn from, not a signal.
5. Where Barqish stops and a full screener starts
Dedicated screening services such as Zoya, Musaffa and Islamicly cover tens of thousands of listed stocks and funds, with scholar boards, portfolio tracking and purification reports. Barqish is an education platform: it teaches the method on a curated list, shows every number and its source, and stays free for the basics. If you hold a broad portfolio, use a dedicated screener and your own scholar for the final word; use Barqish to understand what those tools are doing.
Questions people ask
Is investing in stocks halal?
Buying shares of a company is buying part-ownership of a real business, which is permitted when the business itself is permissible and its finances stay within accepted limits. Scholars screen two things: what the company does (no conventional banking, insurance, alcohol, gambling, pork, tobacco or adult content) and how it is financed (interest-bearing debt, interest income and cash held in interest-bearing instruments below set thresholds). Shares of banks, insurers and similar businesses fail the first test outright.
What are the AAOIFI ratios?
AAOIFI Shariah Standard 21 sets three financial limits, each measured against market capitalisation: interest-bearing debt below 30%, interest-bearing deposits and securities below 30%, and income from prohibited sources below 5% of total income. Barqish computes these for its US list from the company’s own SEC filings and today’s market cap. Other screeners use total assets instead of market cap or a 33% limit, which is why two screeners can disagree on the same stock.
How does the PSX KMI-30 screen companies?
The Pakistan Stock Exchange’s KMI-30 uses six tests certified by its Shariah advisors: a permissible core business; interest-bearing debt below 37% of total assets; non-compliant investments below 33% of total assets; non-compliant income below 5% of revenue; illiquid assets at least 25% of total assets; and a market price per share at least equal to net liquid assets per share. The index is recomposed twice a year, so a company can enter or leave.
What is purification?
Even a compliant company may earn a small amount of interest on its cash. Most scholars advise giving away the share of any dividend or gain that corresponds to that impermissible income, with no intention of reward. Barqish shows the interest-to-revenue ratio so you can estimate it; your own scholar or a dedicated screener should confirm the method.
Does a Favourable reading mean I should buy the stock?
No. A reading describes today’s trend conditions: price against its 200-day and 50-day averages, 20-session momentum, distance from the one-year high and recent volatility. Favourable means conditions look healthy, not that the company is good value or right for you. It is education, never an instruction.
Where does the stock data come from?
US quotes are delayed market data refreshed through the trading day; screening figures come from official SEC EDGAR filings (10-K and 10-Q). Pakistan quotes are delayed prices and end-of-day history from the Pakistan Stock Exchange’s public data portal. Barqish does not sell, hold or route orders for any stock.
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Barqish is an educational platform. Readings describe market conditions and are never instructions to buy or sell. Screening is educational and not a fatwa; where scholars differ we say so. Updated 29 September 2026.