How the AAOIFI Shariah Stock Screener Works
Evaluating whether a public corporation is permissible for Islamic investment requires strict mathematical scrutiny of its SEC 10-K or annual financial disclosures. This engine implements the four core quantitative filters of AAOIFI Shariah Standard No. 21.
Filter 1: Interest-Bearing Debt Ratio (< 30%)
Formula: (Short-Term Debt + Long-Term Debt) / 36-Month Average Market Capitalization < 0.30.
If a corporation's interest-bearing debt exceeds 30% of its market valuation, it is deemed excessively leveraged with usurious capital and disqualified.
Filter 2: Cash & Interest-Bearing Securities (< 30%)
Formula: (Cash + Cash Equivalents + Short-Term Marketable Securities) / Market Capitalization < 0.30.
Prevents trading in entities whose shares primarily represent cash claims.
Filter 3: Accounts Receivable Ratio (< 67%)
Formula: Total Trade Receivables / Total Assets < 0.67.
Ensures tangible operating assets dominate commercial debt claims.
Filter 4: Non-Permissible Income (< 5%)
Formula: Non-Permissible Incidental Income / Total Gross Revenue < 0.05.
Any incidental interest earned must be fully purified using our Dividend Purification Formula.