Shariah Methodology

Shariah Screening Methodology

Tazkiyah strictly adheres to the AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) standards for equity screening.

Business Screening (Qualitative)

We filter out companies whose primary business activities are non-compliant:

  • Interest-based financial services (Conventional Banks, Insurance)
  • Alcohol production or sales
  • Gambling / Gaming
  • Pork related products
  • Pornography
  • Tobacco
  • Weapons

Financial Screening (Quantitative)

For companies with mixed revenue sources, we apply the following financial ratio tests (based on market capitalization / total assets trailing 12 months):

1. Debt Ratio

Total interest-bearing debt must be less than 33% of market capitalization (or total assets, depending on the selected standard).

2. Liquidity Ratio

Cash and interest-bearing securities must be less than 33% of market capitalization.

3. Impermissible Income Ratio

Income from non-compliant sources must be less than 5% of total revenue.

Note: Tazkiyah provides tools to purify the impermissible income portion of your dividends.

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