Verify the methodology
Shariah classifications can differ by scholar, board, index provider, fund, or jurisdiction. Record who performed the review, the standard and thresholds used, the date, and the update frequency. A list without a methodology or current date is weak evidence.
Review activity and financial ratios
Screen the company’s primary business, subsidiaries, and mixed revenue. Then review the financial-ratio tests defined by the applicable standard, including how debt, cash, receivables, and non-permissible income are measured. Denominators and thresholds vary, so do not substitute a generic formula.
Understand purification
Some methodologies allow limited incidental non-permissible income and calculate an amount for purification. The process may be handled by a fund or left to the direct investor. Use the applicable method and qualified guidance rather than guessing a percentage.
Read sukuk and ETF documents
| Product | Documents | Key risks |
|---|---|---|
| Share | Screen methodology, financials, governance | Business, valuation, status changes |
| Sukuk | Terms, Shariah pronouncement, obligor and structure | Credit, duration, liquidity, legal recourse |
| ETF | Prospectus, index, holdings, adviser, purification | Tracking, fees, concentration, currency |
Monitor after purchase
Acquisitions, financing changes, segment shifts, and updated accounts can change compliance. Review the security on the schedule required by your process and understand what the relevant methodology says about a status change.
Detailed guide
Read Shariah-Compliant Investing on ADX: Screening, Sukuk and ETFs for the complete framework.