drelansarym.com · Halal investing guides · Updated 2 Nov 2026

Is this stock halal? How to screen any stock yourself

You don't need a paid app to get a first answer. Every major Shariah screen asks the same two questions: what does the company do, and how is it financed. Here is the method, using the thresholds published by the standards the big halal funds follow.

Step 1: Business activity screen

Exclude companies whose core business is impermissible: conventional banking and insurance (interest-based), alcohol, pork, gambling, adult entertainment, and in most screens tobacco and weapons. Look at the company's annual report (10-K in the US) under "segments" or "revenue by product".

Most screens also allow a small amount of incidental impermissible revenue, typically under 5% of total revenue (AAOIFI Shariah Standard 21). Above that, the stock fails.

Step 2: Financial ratio screens

RatioAAOIFI (Standard 21)S&P Shariah indices (SPUS)Dow Jones Islamic Market (UMMA)
Interest-bearing debt< 30% of market cap< 33% of 36-month average market cap< 33% of 24-month average market cap
Cash and interest-bearing securities< 30% of market cap< 33% of 36-month average market cap< 33% of 24-month average market cap
ReceivablesStandard includes asset-composition rulesReceivables + cash < 49% of total assets< 33% of 24-month average market cap

FTSE's Shariah indices (used by HLAL) divide by total assets instead of market cap. That's why the same stock can pass one screen and fail another. Always check which methodology a fund or app uses.

Step 3: Calculate it with real numbers

  1. From the balance sheet, add short-term debt plus long-term debt. That's your interest-bearing debt.
  2. Add cash, short-term investments and interest-bearing deposits.
  3. Divide each by market capitalisation (share price × shares outstanding). For the index version, use the average over 24 or 36 months.
  4. Compare against the thresholds above.

Step 4: Purify what's left

A stock that passes can still earn a little impermissible income (for example, interest on cash). The usual practice is to work out that share of each dividend and give it to charity, without counting it as your own sadaqah or zakat. Halal ETFs publish a purification percentage each year.

Step 5: Re-check every quarter

Ratios move with share prices and new debt. A stock that is compliant today can fail next quarter, which is why index funds rescreen regularly.

Shortcut

If you don't want to screen single stocks, a Shariah-screened ETF does the screening for you. See our halal ETF list.

Get sourced answers to your own halal-investing questions: join the Halal Investing community on Skool ($10/month, cancel any time) →

Education, not a fatwa and not investment advice. Investing carries risk, including loss of capital. Where scholars differ we say so; ask a qualified scholar about your own situation. Written by Mohamed Elansary, PhD.