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Shariah Screening

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Shari'ah Screening

The awareness and demand for Shari'ah compliant investments are increasing rapidly.
A detailed screening process is applicable to ensure that Investments complies with Shari’ah rules and principles.

Screening

The 5 key dimensions of a complete process of the Shari'ah screening method are:

1) Exclusion of companies engaged in prohibited business activities.
2) Exclusion of companies exhibiting prohibited financial ratios.
3) Exclusion of companies with insufficient information.
4) Calculation of a dividend purification ratio.
5) Periodic screening of the companies and revising the approved list of Shari'ah compliant companies.

Exclusion of companies engaged in prohibited business activities.

a) The core activities of the companies should not be impermissable / or shari'ah incompatible. Such services would therefore include:

Financial services based on interest; Gambling; Manufacture or sale of non halaal products eg. pork or alcohol or related products; Conventional insurance; Entertainment activities; Manufacture or sale of tobacco based products or related products; Stock broking; Share trading in shariah non approved securities; Defense/weapons; Companies offering lottery or betting services; Music; Owners and operators of hotels; Cinema and adult entertainment.

b) Certain companies comprise both permissable and non-permissable elements. For such companies the following criteria are used:

The core activities of the company are important and considered to be in the public interest of the Muslim Ummah. The non permissable element involves matters that are difficult to avoid. However, for these non permissable elements, there exist “Benchmarks of Tolerance”.
The 10% Benchmark: Applied to assess the level of mixed contributions from the activities that involve the elements that

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