Our Screening Process

Shariah Compliance Screening: The Key to Halal Investment Portfolios

Building Halal Portfolios with Integrity

At Iqra Stocks, our mission is simple:

Help you invest with confidence, knowing your portfolio is fully aligned with your faith.

Shariah compliance is the foundation of everything we do. Every stock we evaluate goes through a strict two-step screening process to ensure both ethical purity and financial integrity.

Step 1: Business Activity Screening

We begin by excluding companies involved in non-permissible (haram) industries. Regardless of financial performance, if a company’s core business touches any of the following, it is automatically excluded:

Conventional banking & insurance
Alcohol, tobacco, gambling, or adult entertainment
Pork-related products or by-products
Weapons & defense manufacturing
Any other Shariah-restricted activities

Only companies with fully halal business models move forward.

Step 2: Financial Ratio Screening

Once a company’s business activities are verified as compliant, we apply financial filters to assess its balance sheet and financial behavior. These ratios ensure the company isn’t overly dependent on interest-based (riba) financing or excessive speculation.

We assess compliance against five leading global Shariah standards:

Screening Method

AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions)

Debt-to-Market Cap Ratio: Interest-bearing debt must not exceed 30% of the company’s market capitalization.
Non-Compliant Assets Ratio: Assets linked to non-permissible contracts (like conventional bank deposits) must remain under 30%.
Impure Income: Interest-based and non-compliant income must not exceed 5% of total revenue.

FTSE Shariah Standards

Debt-to-Assets Ratio: Total debt must be ≤33.33% of total assets.
Cash-to-Assets Ratio: Cash and cash equivalents must be ≤33.33% of total assets.
Cash + Account Receivables-to-Assets Ratio: The combined value must be ≤50%.

Dow Jones Islamic Market Index (DJIM)

Uses a 24-month rolling average market capitalization rather than a single point-in-time market cap for debt calculations.
Focuses primarily on the debt ratio, with the same upper limit of ≤33%.
Uses interest-based debt as the primary exclusion factor.

S&P Shariah Standards

Similar to DJIM but applies a 36-month average market cap for calculations to reduce short-term volatility effects.
Primary focus is the Interest-bearing Debt-to-Market Cap Ratio, capped at 33%.

MSCI Islamic Index Methodology

Assesses both Debt-to-Assets Ratio and Cash + Receivables-to-Assets Ratio.
Debt must be ≤33.33% of total assets.
Cash + Receivables must not exceed 33.33%, which is stricter compared to FTSE’s 50% limit.

✅ Iqra’s 5-Star Compliance Rating

A company only needs to pass any one of these five screening methods to be considered Shariah-compliant. However, for greater confidence and transparency, we rank companies using a 5-star system:

- Meets one standard

- Meets all five standards

This gives you full visibility over how robustly a company has passed global Shariah compliance checks.

Ongoing Shariah Monitoring

Compliance isn’t a one-time check — it’s an ongoing commitment.

We continuously monitor:

Quarterly financials
Debt levels & restructures
Business model updates
Mergers, acquisitions, and divestitures

If a company no longer meets the Shariah standards, it is flagged for review and removed from our list.

Ethical Investing, Made Simple.

With Iqra Stocks, you invest confidently — knowing every selection reflects both your values and sound financial discipline.