Our Halal Screening Methodology

At HalalSignalz, we are committed to providing the Muslim community with investment opportunities that align with their faith and values. To achieve this, we have developed a rigorous, multi-layered screening process. Our public screening standard uses a stricter 30% debt and cash threshold. Some index providers use one-third thresholds, but HalalSignalz labels those external-provider methodologies explicitly when they are referenced.

1. Sector (Business Activity) Screening

The first step in our process is a qualitative assessment of a company's core business activities. We analyze its primary sources of revenue to ensure they are permissible under Islamic law. Companies deriving any material revenue (typically defined as more than 5% of total income) from the following prohibited sectors are automatically excluded:

• Conventional Financial Services: Banking, lending, and insurance based on interest (riba).
• Prohibited Food & Beverage: Production, distribution, or sale of pork, alcohol, and non-halal meat.
• Vice Industries: Gambling, casino operations, betting, and adult entertainment.
• Tobacco & Harmful Products: Manufacturing and distribution of tobacco and related products.
• Defense & Conflict: Weapons manufacturing, military equipment, and defense-related activities that do not meet ethical standards.

2. Financial Ratio Screening

Once a company passes the sector screen, we conduct a quantitative analysis of its financial statements. This ensures that the company is not overly leveraged or reliant on interest-based assets. A company is considered compliant only if it meets all three of the following financial thresholds based on a rolling average:

Note: some index providers and methodologies use one-third or 33.33% thresholds. HalalSignalz applies the stricter 30% public threshold for debt and cash unless a page explicitly labels an external-provider methodology. Some scholars also utilize Total Assets instead of Market Capitalization for the denominator.

3. Income Purification and 5% Rule

In the modern global economy, many large companies have small amounts of "impure" income from interest or non-compliant minor activities. If this income remains below 5% of total revenue, the company remains eligible for investment. However, this impure portion must be "purified" by donating it to a registered charity.

Signals do not include a per-share purification figure. Before purifying gains, check the company's latest reported non-permissible income percentage and apply it to your own position size. Our purification guide walks through the calculation step by step, and each stock detail page flags when purification review is required.

4. Shariah Framework for Digital Assets

Cryptocurrencies and DeFi projects present unique Shariah challenges. We apply the Crypto Shariah Screening Framework (developed by Mufti Faraz Adam and other leading scholars) every month. Our digital asset screening covers four critical areas:

• Technology Layer: We evaluate the permissibility of the smart contract logic and the underlying blockchain protocol to ensure they are free from forbidden elements.
• Project Utility: The token must have a clear, beneficial use case that is Shariah-compliant. Tokens purely for gambling or prohibited lending are excluded.
• Tokenomics & Gharar: We assess the distribution and risk profile to avoid excessive speculation (gharar), excessive uncertainty, or prohibited leverage mechanisms.
• Governance Structure: The project must demonstrate sufficient transparency and a decentralized nature, free from the control of impermissible entities.

5. Ongoing Revalidation and Monitoring

Shariah compliance is dynamic, not static. Financial ratios change with market fluctuations and quarterly earnings reports. We continuously monitor our current public universe of 76 stocks, 20 crypto assets, and 29 ETF pages:

• Stock Revalidation (Quarterly): We update all financial ratios immediately following the release of a company's 10-Q or 10-K filings.
• Crypto Revalidation (Monthly): We review project whitepapers, developer activity, and governance changes to ensure the original thesis remains valid.
• Alerting System: If an asset becomes "Non-Compliant" (Haram), we issue an immediate exit signal to our subscribers regardless of the current profit/loss status.

Disclaimer

HalalSignalz provides educational information only. It does not constitute individualized financial advice or replace scholarly opinions. Always consult your own Islamic finance scholar or financial advisor before making investment decisions.

Last updated: 9 June 2026