What are the Sharia screening criteria for stocks?
Each test with its limit and denominator, and which ones we run.
Short answer
AAOIFI Shari'ah Standard No. 21 checks four things: the company's core business is permissible, interest-bearing debt is below 30% of the 12-month average market capitalisation, interest-bearing cash and deposits are below 30% of it, and non-compliant income does not exceed 5% of total revenue. We run all four on every stock whose figures we can find: non-compliant income is measured as interest income to total revenue from the annual income statement, and for an Arab stock whose statements do not break out interest income we compute a conservative upper bound. Each stock page states what we measured and what we did not.
The tests as we apply them
- Activity: we exclude companies whose core business is impermissible. An Islamic financial institution's business is acceptable under the standard.
- Interest-bearing debt to market value: limit 30%, with the 12-month average market capitalisation of all the company's shares as the denominator.
- Interest-bearing cash and deposits to market value: limit 30%, same denominator.
- Non-compliant income to total revenue: limit 5%, measured as interest income from the annual income statement, or as a conservative upper bound when the statements do not break it out.
We last reviewed these limits on 2026-10-01. We monitor the published standard regularly, and any change appears here and on the stock pages at the same time.
The conservative upper bound on non-compliant income
Some Arab companies do not break out interest income in the statements available to us. For them we compute a conservative upper bound: all other non-operating income, plus cash multiplied by 18% (an assumed 6% return multiplied by 3 as a precaution), divided by total revenue of the same fiscal year.
If this upper bound is 5% or less we write «compliant» together with a «conservative upper bound» line showing the figure. If it is higher we do not write «not compliant» on an estimate, and the stock stays «screening incomplete» until we find the figure.
Our basis for estimating is the Al Rajhi Capital Shariah Board's text on calculating prohibited income, which says (our translation): «where some income is not disclosed, one strives to determine it, erring on the side of caution».
Al Rajhi Capital Shariah Board, mechanism for calculating prohibited income
Why market value is the denominator
Standard 21 measures interest-bearing debt and cash against the market value of all the company's shares. The practical effect: when the share price rises the ratio falls, and when it drops the ratio rises, so a stock's status can change with no change at all in the company's balance sheet. That is why we use the 12-month average market capitalisation, not a single day's value, so a passing price move does not flip the result.
Some global index providers measure the same ratios against total assets instead of market value, which is why their lists differ from ours on some stocks. We explain the difference on a separate page.
Where the numbers come from
We read debt, cash and market value from each company's published market data and print the data date next to every result. Debt in this data is total borrowing, with no split between interest-bearing and Islamic financing, which is why the screening of Islamic banks shows as incomplete rather than failing them on a ratio that does not measure what the standard measures.
Related questions
Why 30% and not one third?
Because Standard 21 sets 30% of market value, which we measure as the 12-month average market capitalisation. Some providers use one third, or total assets, and the difference between standards is explained on the page about why lists differ.
Do you screen receivables?
No. Standard 21 sets no limit for receivables against market value. Some global indices screen them under their own rules; we mention that, but we do not add a limit the standard we apply does not contain.
How often is the screen updated?
With every market data update; the latest data date is shown on each stock page and in the screener. In this update the data is dated 2026-10-28.
Pages that complete the answer (5)
Our Sharia screening is an automated reading of published criteria, not a fatwa.