Shariah Stock Screening Calculator

About the Shariah Stock Screening Calculator

Shariah screening standards look at two things: what a company does — its business activity — and how much of its balance sheet and income rests on interest, through a few financial ratios. This calculator takes the figures from a company’s accounts — its market capitalisation, total assets, interest-bearing debt, cash and interest-bearing securities, receivables, revenue and non-compliant income — and works out each standard’s ratios against its published thresholds: AAOIFI’s Shari’ah Standard 21, the MSCI Islamic indexes (on total assets, and the M-Series on the average market capitalisation) and FTSE Shariah. A standard of your own takes any other provider’s denominators and thresholds.

It shows each ratio, its threshold and whether it passes, and the result of each standard side by side, with the AAOIFI result first. The business screen is your own answer: the calculator never decides what a company’s activities are. It is not a fatwa, a certification or a recommendation — screening providers and scholars can differ — and nothing you type leaves your browser.

Common uses

• Check a company’s ratios against the main screening standards before you invest.
• See why a company passes one standard and fails another.
• Follow a screening provider’s own thresholds with a custom standard.
• Recheck a holding when its accounts or market value change.

The formulas

Each ratio is a figure from the accounts divided by a base, tested against the standard’s threshold:

• AAOIFI: interest-bearing debt ÷ market capitalisation, at most 30%; cash and interest-bearing securities ÷ market capitalisation, at most 30%; non-compliant income ÷ revenue, within 5% (AAOIFI Shari’ah Standard 21: Financial Paper (Shares and Bonds); the ratios as Zoya help centre: how stocks are screened (AAOIFI’s ratios) sets them out).
• MSCI Islamic: total debt, cash and interest-bearing securities, and receivables and cash, each ÷ total assets, at most 33.33%, 33.33% and 70%; the M-Series ÷ the 36-month average market capitalisation, at most 33.33%, 33.33% and 49%; revenue from prohibited activities and interest ÷ total income, at most 5%. A company not yet in the index must keep within the entry buffers of 30%, 30% and 46% (MSCI Islamic Index Series methodology).
• FTSE Shariah: debt, cash and interest-bearing items, each less than 33.333% of total assets; receivables and cash less than 50%; interest and non-compliant income at most 5% of revenue (LSEG: FTSE Shariah Global Equity Index Series).

A ratio exactly at its threshold passes “at most” and fails “less than”, as the standards word them.

Reading the results

• Passes: every ratio is within its threshold and you answered that the core business is not excluded.
• Ratios pass; check the business: you answered “not sure”, so the business screen is still open.
• Does not pass: the ratios named failed, or the business is excluded.
• Incomplete: a figure the standard needs is missing; the other standards still show.
• Results differ between standards because their bases differ: market capitalisation moves with the share price, total assets do not.

What it leaves out

• Which activities are excluded and how much of each a company has: that is the business screen, yours to answer from the company’s reports or your screening provider.
• Shariah-compliant financing: some standards leave Islamic debt and deposits out of the ratios; enter only the interest-bearing amounts if yours does.
• The S&P Shariah and Dow Jones Islamic Market standards are not preset: set up their denominators and thresholds as your own standard from their methodologies.
• The purification of dividends and zakat: see the dividend purification calculator.

Limitations

• The thresholds are the ones each provider publishes, as read on its own pages; providers revise their methodologies, so check the linked pages for a decision.
• Market capitalisation changes every day: a ratio on market value can pass one day and fail the next.
• The calculator compares numbers; it cannot tell whether a company’s activities are permissible.
• This compares your figures with each standard’s published thresholds. It is not a fatwa, a certification or a recommendation: screening providers and scholars can differ. Ask a qualified Shariah scholar or your screening provider.

Privacy

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