Our Halal Screening Methodology
HalalSignalz follows internationally accepted guidelines — including AAOIFI Standards, Dow Jones Islamic Index criteria, and the MSCI Islamic Index — to identify equities and crypto assets suitable for Shariah‑compliant portfolios.
1. Sector (Business Activity) Screening
Companies deriving any material revenue from the following sectors are excluded:
- Conventional banking & interest-based financial services
- Traditional insurance (non-takaful)
- Alcohol production, distribution or sale
- Pork-related products and non-halal food production
- Tobacco manufacturing and distribution
- Gambling, casino operations, and betting
- Adult entertainment and pornography
- Weapons, defense, and military equipment manufacturing
2. Financial Ratio Screening
A company passes if it meets all three financial thresholds:
| Ratio | Formula | Maximum Threshold |
|---|---|---|
| Total Debt | Total Interest‑Bearing Debt ÷ Market Cap | < 33% |
| Cash & Interest Securities | (Cash + Interest Securities) ÷ Market Cap | < 33% |
| Accounts Receivable | Accounts Receivable ÷ Total Assets | < 49% |
3. Purification Threshold
Companies with non‑permissible income exceeding 5% of total revenue are excluded. For companies with minor impure income (<5%), we calculate a per‑share purification amount, included in the signal details for charitable donation.
4. Crypto Assets Screening
We apply the Crypto Shariah Screening Framework (Mufti Faraz Adam, 2021) monthly. Our comprehensive screening covers:
- Technology Layer: Permissibility of smart contracts, DeFi infrastructure, and underlying blockchain technology
- Use of Funds: Must be transparent and directed toward Shariah-compliant projects and activities
- Tokenomics: Must avoid excessive speculation (gharar), excessive uncertainty, or prohibited leverage mechanisms
- Governance: Must be sufficiently decentralized and free from impermissible influence or control
5. Review Frequency
- Equities — Quarterly: Financial ratios updated after earnings reports to ensure continued compliance.
- Crypto — Monthly: Project fundamentals, documentation, and technology developments reviewed for adherence to Shariah principles.
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: 20 April 2025