Stock Screening in Islamic Finance

UAE Laws and Islamic Finance

 

 

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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