Shariah Screening Methodology: Does It ‘Really’ Shariah Compliance?

Abdullah Mohammed Ahmed Ayedh, Amir Shaharuddin, Muhammad Iqmal Hisham Kamaruddin


The Shariah financial screening indices is to exclude companies with unacceptable levels of conventional debt, liquidity, interest-based investment and/or impure income. Ideally, companies must not borrow on the basis of interest rate, nor invest in debt-bearing instruments, as well as not generating income through any other Shariah-impermissible activities. However, such restrictions would screen out the vast majority - if not all - of the stocks that are available on the market, even those listed in Islamic countries. Based on this condition, Shariah scholars tried to come out with a set of Shariah indices to be tested on existing companies in order to classify them as Shariah-compliant companies. Thus, the aim of this paper is to explore and critically analyse comparison of Shariah screening methodology amongst major Shariah indices in the world. By applying the reviewing for all related literature and contents of Shariah screening’s laws and regulations. It can be stated that several group of Shariah indices can be categorized. Firstly, under qualitative measures (business activities), there are two groups which are: (i) financial activities orientation; and (ii) indic with non-financial activities orientation. Meanwhile, under quantitative measures (financial ratios), another several groups can be categorized based on different adoption in the nominator, denominator and tolerate percentage used. It is hoped that this work would inspire more research on Shariah screening using different research methods and compare between the indices according to segments this research argued. Besides, the policy makers should give more attention to ensure the Shariah screening practices and the enhancement Shariah screening standardizing among the major Shariah indices. Last but not least, investors and stakeholders whom concern of Shariah screening could also benefited of the findings of this study by having better understanding of Shariah screening practices and compare between existed indices.


Shariah screening methodology; Shariah indices; Shariah compliance; Islamic accounting

Full Text:



AAOIFI. (2015). Shari’ah Standards. Manama: Accounting and Auditing Organization for Islamic Financial Institutions.

AAOIFI. (2014). Shariah Standards, Manamah – Bahrain, Accounting and Auditing Organization for Islamic Financial Institutions.

Ahmad, Z., & Ibrahim, H. (2002). A study of the performance of the KLSE Syari'ah index. Malaysian Management Journal, 6(1), 25–34.

Abdul Rahman, A., Yahya, M. A, & Mohd Nasir, M. H. (2010). Islamic Norms for Stock Screening: A Comparison between the Kuala Lumpur Stock Exchange Islamic Index and the Dow Jones Islamic Market Index. International Journal of Islamic and Middle Eastern Finance and Management, 3(3), 228-240.

Adam, N. L., & Bakar, N. A. (2014). Shariah Screening Process in Malaysia. Procedia-Social and Behavioral Sciences, 121, 113-123.

Bank Negara Malaysia. (2005). KLSI and KLCI daily closing prices. Retrieved on June 2005, from

Derigs, U., & Marzban S. (2008). Review and Analysis of Current Shariah-compliant Equity Screening Practices. International Journal of Islamic and Middle Eastern Finance and Management, 1(4), 285-30.

Dow Jones. (2013). Dow Jones Islamic Market Indices: Overview. Retrieved from (Accessed on 16 December 2013).

Fazilah, M. A. S. (edited). (2006), The Malaysian Financial System: An Overview, University Malaya Press, Kuala Lumpur.

Gamaleldin, F. M. (2015). Shariah-Compliant Stocks Screening and Purification. Master Dissertation, University of Liverpool, United Kingdom.

Habib, F., & Faruq, A. A. U. (2017). Revisiting the AAOIFI Shariah Standards’ Stock Screening Criteria. International Journal of Business & Society, 18(1), 151-166.

Hashim, A. M., Habib, F., Isaacs, Z., & Gadhoum, M. A. (2017). ISRA Bloomberg Shari’ah Stock Screening and Income Cleansing Methodologies: A Conceptual Paper. ISRA International Journal of Islamic Finance, 9(1), 27-42.

Ho, C. S. (2015). International Comparison of Shari’ah Compliance Screening Standards. International Journal of Islamic and Middle Eastern Finance and Management, 8(2), 222-245.

Hussin, A. H., Hussin, N. H. & Abdul Razak, D. (2015). Shariah Stock Screening Methodology:A Comparison Between Shariah Advisory Board of Securities Commission Malaysia andInternational Index Providers. In Hashim, R. and Abdul Majeed, A.B. (Eds.), Proceedings of the Colloquium on Administrative Science and Technology (pp.191-202). Singapore: Springer Link.

ISRA. (2016). Islamic Financial System: Principles and Operations (2nd Eds.). Kuala Lumpur, Malaysia: International Shar’ah Research Academy for Islamic Finance.

Jamal, J., Hambali, N., & Mohd Ali, H. (2010). Islamic capital market and Shari’ah screening in Malaysia. International Research Symposium in Service Management (pp.1-16).

Kasi, U., & Muhammad, J. (2016). Strict and Uniform Shariah Screening Methodologies in Selected Asian Countries in Comparison with the United States. Asian Journal of Finance & Accounting, 8(1), 38-76.

Khatkhatay, M. H., & Nisar, S. (2006). Shariah-Compliant Equity Investments: An Assessment of Current Screening Norms. Islamic Economic Studies, 15(1), 47-76.

McMillen, M. J. T. (2006). Islamic capital markets: developments and issues. Capital Markets Law Journal, 1(2), 136-72.

MSCI. (2013). MSCI Barra Launches Global Family of Islamic Indices: Dividend Purification and Broad Country Coverage: Retrieved from (Accessed on May 5, 2019).

Mian, K. M. A. (2008). Shariah Screening and Islamic Equities Indices. Islamic Finance News, 5(17).

Mohd Hussin, M.Y., Muhammad, F., Abu, M.F., & Awang, S.A. (2012). Macroeconomic Variables and Malaysian Islamic Stock Market: A Time Series Analysis. Journal of Business Studies Quarterly. 3(4), 1-13.

Mohamad, S., & Razif, N. F. M. (2013). Shariah Compliant Securities, Sukuk and Islamic REITs in Malaysia. In Ahmad, W. M. W. (Eds.), Islamic Economics, Banking and Finance: Concept and Critical Issues, Pearson, 121-139.

Mohd-Sanusi, Z., Ismail, R., Hudayati, A., & Harjito, D. (2015). Screening Process of Shariah-Compliant Companies: The Relevance of Financial Risk Management. International Journal of Economics & Management, 9(1), 177-195.

SAC-SC. (2017). Frequently-Asked Questions on Revised Shariah Screening Methodology, available at: (accessed 22 March 2017).

Sani, N. A., & Othman, R. (2013). Revision of Shariah Screening Methodology: The Status of Shariah-Compliant Companies in Malaysia. Proceedings of the 3rd International Conference on Management (3rd ICM 2013), Malaysia, 51-63.

S&P Dow Jones Indices LLC. (2018). Shariah (Dow Jones Islamic Market). Retrieved from (Accessed on Mac 5, 2019).

Shamsuddin, A. (2014). Are Dow Jones Islamic equity indices exposed to interest rate risk? Economic Modelling. 39, 273–281.

Shanmugam, B., & Zahari, Z. R. (2009). A Premier on Islamic Finance.

Yildirim, R., & Ilhan, B. (2018). Shari'ah Screening Methodology - New Shari'ah Compliant Approach. Journal of Islamic Economics, Banking and Finance, 14(1), 168-191.

Zandi, G., Abdul Razak, D., & Hussin, N. (2014). Stock Market Screening: An Analogical Study on Conventional and Shariah-Compliant Stock Markets. Asian Social Science, 10(22).



  • There are currently no refbacks.

Copyright (c) 2019 IQTISHADIA

Iqtishadia Journal Indexed by :

Creative Commons License
Iqtishadia : Jurnal Kajian Ekonomi dan Bisnis Islam is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

View My Stats