Sharia Screening Thresholds: A Practical Guide
September 29, 2026 · 6 min read
How halal equity screens work: business-activity filters, financial-ratio caps and income purification, explained without the jargon.
Two kinds of screen
Sharia-compliant equity screening has two parts. The first is qualitative: does the company's core business involve prohibited activities such as alcohol, gambling, conventional financial services, tobacco or adult entertainment? The second is quantitative: do its financial ratios stay within set limits?
The ratio tests
Most screening standards cap interest-bearing debt, interest-bearing cash and securities, and non-compliant income, each relative to a base such as market capitalisation or total assets. Commonly cited ceilings fall around a third for debt and cash ratios and a few percent for impure income, but the exact figures and the denominator differ between standards and index providers. Always check the methodology of the screen being used.
Purification
If a company passes but earns a small share of income from impermissible sources, investors typically donate the corresponding portion of their dividends to charity. This is called purification. Some funds do it for you.
Why screens disagree
One stock can pass one provider's screen and fail another's because of different denominators, averaging periods or treatment of certain income. That is normal. For individual decisions, consult a qualified Sharia scholar or the board of the fund you use.
