Shariah screening
Checking whether a company's business and finances meet Shariah criteria before it can be held in an Islamic fund or index.
Shariah screening is the process of assessing securities against Shariah criteria before they are included in an Islamic fund, index or portfolio. Screens typically combine a business activity test, excluding prohibited sectors, with financial ratio tests on matters such as interest-bearing debt and income from non-compliant sources, and the thresholds differ between standard setters and index providers. IFSB-24 lists screening processes among the Shariah matters that should be disclosed to investors.
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This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.