According to Amanie, there are two main methods for Islamic stock screening including the Malaysian and the Global approach. In the Malaysian approach, one examines the core-activities and non-halal income while in the Global approach, one examines the core activities, non-halal income as well as the interest expense and the ratio of liquid assets to illiquid assets.
Stock Screening (Level 1) Core-Prohibited Activities
The following activities are generally considered core-prohibited activities:
- Conventional financial institutions based on interest (riba) or contractual uncertainty (gharar) – insurance/reinsurance.
- Alcoholic beverages.
- Gaming/gambling/games of chance.
- Pork production.
- Non-halal food products.
- Entertainment and leisure related to pornography or with an adult content.
- Arms, defence, and military equipment manufacturers. (Hallelujah!)
- Tobacco-related products.
- Other activities deemed to be repugnant to Sharia’h principles.
According to Amanie, all of the core-prohibited activities listed above are clearly prohibited in the sources of Islamic law except the arms and tobacco…
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