Halal Investment Screening
Ensure your investments are Shariah compliant. Stock screening, fund screening, purification calculation, and halal alternatives.
Ensure Your Investments Are Shariah Compliant
Investing is a cornerstone of modern financial planning. You invest for retirement. You invest for your children education. You invest to grow your wealth. But if your investments are not Shariah compliant, you are committing a sin every time you earn a dividend or capital gain. The money is tainted. You cannot use it. You must donate it to charity. This defeats the purpose of investing.
Many Muslims assume that if they avoid alcohol, gambling, and pork stocks, their portfolio is halal. This is not sufficient. A company can be in a halal industry but still be non compliant due to its financial ratios. If a company has too much debt or too much interest income, it becomes non compliant. The AAOIFI standard says debt cannot exceed 33 percent of market value. Interest income cannot exceed 5 percent of revenue. Many seemingly halal companies fail these tests.
Our Investment Screening service provides professional Shariah compliance screening for your portfolio. We screen individual stocks, mutual funds, ETFs, and other securities. We use AAOIFI standards, FTSE Shariah, or your preferred methodology. We provide a clear report showing which holdings are compliant, which are non compliant, and which are questionable. We calculate purification amounts for any impermissible income. We recommend halal alternatives for non compliant holdings.
Do not invest in ignorance. Know what you own. Ensure your hard earned money is invested in a way that pleases Allah.
What's Included
Individual Stock Screening
We screen individual stocks that you own or are considering buying. We check the company core business. Does the company derive any revenue from haram activities? Alcohol, gambling, pork, pornography, conventional finance, weapons, tobacco. We check the company financial ratios. Is interest bearing debt below 33 percent of market capitalization? Is interest income below 5 percent of total revenue? Are accounts receivable below 50 percent of total assets? We provide a clear yes or no on compliance. For questionable cases, we explain why.
Fund and ETF Screening
Mutual funds and ETFs are baskets of stocks. Screening a fund is more complex than screening individual stocks. We look at the fund holdings. What percentage of the fund is invested in non compliant stocks? AAOIFI allows up to 5 percent in non compliant stocks. We also look at the fund investment policy. Does the fund promise to avoid haram industries? Does the fund have a Shariah board? We screen both the holdings and the fund structure. We tell you whether the fund is acceptable for Muslim investors.
Purification Calculation
If your portfolio includes non compliant holdings or if you received impermissible income, we calculate the purification amount. Purification means donating the tainted portion to charity without expecting reward. For dividends from non compliant stocks, you donate the percentage of the company revenue that came from haram activities. For interest from bank accounts, you donate the full amount. For capital gains from selling non compliant stocks, you donate the gain. We calculate the exact amount. We tell you how to donate it. We provide a record for your zakat file.
Compliance Report
You receive a detailed compliance report for your portfolio. The report includes a summary of your overall compliance status. A table of each holding with red yellow green indicators. Red means non compliant. Yellow means questionable. Green means compliant. Detailed explanations for each holding. Purification calculation if needed. Recommendations for halal alternatives. The report is suitable for your records and for sharing with your financial advisor.
Halal Alternative Recommendations
For each non compliant holding, we recommend a halal alternative. If you own a conventional bank stock, we recommend an Islamic bank stock. If you own a conventional index fund, we recommend a Shariah screened index fund. If you own a bond fund, we recommend a Sukuk fund. We provide ticker symbols or fund codes. We explain why the alternative is better from a Shariah perspective. We also advise on tax implications of switching.
Ongoing Monitoring
Compliance is not a one time event. Companies change. A compliant stock can become non compliant if the company takes on too much debt or enters a haram business. We offer ongoing monitoring. We screen your portfolio quarterly. We alert you immediately if any holding becomes non compliant. We recalculate purification amounts. We provide quarterly compliance reports. Our monitoring service ensures you stay compliant without having to check every stock yourself.
How It Works
Portfolio Submission
You provide your portfolio holdings. You can upload brokerage statements, fund fact sheets, or a spreadsheet. We accept most formats. Your data is kept confidential.
Methodology Selection
You choose your preferred screening methodology. AAOIFI is the most common. FTSE Shariah is used by many index providers. Dow Jones Islamic Market is another option. You can also request a custom methodology.
Screening
Our team screens your portfolio within three to five business days. We research each holding using multiple data sources. We apply the chosen methodology.
Report Delivery
You receive your compliance report. We schedule a 30 minute call to review the findings. We answer your questions. We explain any questionable holdings.
Implementation
We help you implement changes. If you want to sell non compliant holdings, we advise on timing. If you want to buy alternatives, we provide purchase suggestions. You execute the trades yourself or through your broker.
Monitoring
If you subscribe to ongoing monitoring, we screen your portfolio again next quarter. We alert you to any changes. We update your report.
Frequently Asked Questions
AAOIFI stands for the Accounting and Auditing Organization for Islamic Financial Institutions. They are the international standard setting body for Islamic finance. Their screening methodology has two parts. The first part is the business screen. The company must not derive significant revenue from haram activities. This includes alcohol, gambling, pork, pornography, conventional financial services, weapons manufacturing, and tobacco. If any revenue is from haram, it must be below 5 percent of total revenue. The second part is the financial screen. The company total interest bearing debt must be less than 33 percent of its market capitalization. The company interest income must be less than 5 percent of its total revenue. The company accounts receivable must be less than 50 percent of its total assets. If the company passes both screens, it is considered halal to invest in. This methodology is used by most Islamic funds and many individual Muslim investors.
This is a common question. Even halal companies may have a small amount of impermissible revenue. For example a halal retail company may have a bank account that earns interest. That interest is a small percentage of total revenue. When you receive a dividend from that company, a small portion of that dividend is from impermissible sources. Most scholars say you should purify that portion. The purification amount is the dividend multiplied by the percentage of impermissible revenue. For example if a company has 1 percent impermissible revenue and pays a HKD 100 dividend, you purify HKD 1. Many screening reports show the purification percentage for each stock. Our report includes this information. We also advise on how to donate the purification amount. It is usually a very small amount. Do not ignore it just because it is small.
ETFs or exchange traded funds can be halal or haram depending on their holdings. Many Islamic ETFs are available. They track indices like the Dow Jones Islamic Market or FTSE Shariah. These ETFs are screened for compliance. Their holdings are only halal stocks. They have a Shariah board. They are halal to invest in. Conventional ETFs that track the S&P 500 or NASDAQ are problematic. They include conventional banks, alcohol companies, gambling stocks, and other haram industries. Even if you are comfortable with the individual stocks, the ETF as a whole is not compliant because it is not screened. We recommend using Islamic ETFs. We can provide a list of Islamic ETFs available in Hong Kong. Do not assume all ETFs are the same. Screen them carefully.
Cryptocurrency screening is more complex than stock screening. There is no established screening methodology. Different scholars have different opinions. Some say all crypto is haram. Others say Bitcoin is halal but meme coins are haram. Others say crypto is permissible as a commodity. Our approach is to present the scholarly arguments and let you decide. If you decide to invest, we advise on which coins are most acceptable. Bitcoin and Ethereum are generally considered more acceptable than Dogecoin or Shiba Inu. Stablecoins raise additional questions about their backing. Privacy coins like Monero are associated with illegal activity. We also advise on zakat for crypto. Most scholars who permit crypto say zakat is due at 2.5 percent of market value. We can help you calculate this.
Yes the same screening rules apply to stocks from any country. The AAOIFI methodology is global. A Japanese bank is screened the same as a US bank. A Chinese alcohol company is screened the same as a French one. However data availability varies by country. For US, UK, and European stocks, data on business activities and financial ratios is easily available from sources like Bloomberg or Refinitiv. For emerging market stocks, data may be harder to find. We may need to rely on annual reports or local sources. We can screen international stocks but the research may take longer. The fee may be higher for international stocks due to the additional research time. Contact us for a quote if you have significant international holdings.
Our investment screening fee depends on the number of holdings. For a portfolio with up to 10 holdings, our fee is HKD 800 to HKD 1,500. For a portfolio with 11 to 30 holdings, our fee is HKD 1,500 to HKD 3,000. For a portfolio with 31 to 100 holdings, our fee is HKD 3,000 to HKD 5,000. For larger portfolios, please contact us for a custom quote. Ongoing quarterly monitoring is available at HKD 2,000 to HKD 4,000 per year depending on portfolio size. We provide a fixed price quote before you engage us. You know exactly what you will pay.