At Prosperia, we carefully check and analyze companies using a thorough method called AAOIFI*.
This helps us create reliable and detailed reports about Indian & Global company stocks.
At Prosperia, we carefully check and analyze companies using a thorough method called AAOIFI*.
This helps us create reliable and detailed reports about Indian & Global company stocks.
At Prosperia, we carefully check and analyze companies using a thorough method called AAOIFI*.
This helps us create reliable and detailed reports about Indian & Global company stocks.
Shariah equity screening is a dynamic process used to assess whether investing in the equity of a listed company is permissible according to Shariah principles.
The company will follow Shariah principles, as explained by the AAOIFI*. We avoid dealing with companies engaged in the following activities:
Companies which derive revenue of less than 5% from the above non permissible activities (including non-operating interest income) are still considered to have passed the Business Sector screening criteria.
After removing companies with non-compliant business activities, the aftermath companies are further examined for compliance with accounting ratios, as certain ratios may violate the compliance measurements.
Cash Compliance: For a company to pass the Cash compliance ratio its total cash and liquid deposits over its 3 years average market capital should be less than 33%.
Debt Compliance: For a company to pass the Debt compliance ratio the total interest bearing debt over its 3 years average market capital should be less than 33%.
Receivable Compliance: For a company to pass the Receivable compliance ratio its total business receivables over its 3 years average market capital should be less than 49%.
Companies having less than 5% of their revenues coming from the prohibited business activities are said to have passed the Sector-based Screens. But the proportion of dividends attributed to revenue generated from such non-permissible business activities and interest income will have to be purified.
Dividend income purification is the process of purging the income received from activities/ sources that are non-compliant as per Shariah principles from the total income.
When Shariah compliant securities receive dividend or any other prohibited income as per Ethical principle as part of a company’s normal business operation, a purification process takes place.
Any proportion of income received from activities that are non-compliant as per Ethical principles may be paid to Charity and thereby ‘purified’.
To determine Shariah compliance for inclusion in the S&P Shariah Indices, Prosperia relies on the latest available financial statements, whether they are quarterly, semi-annual, or annual. While annual statements are generally audited, quarterly and semi-annual statements may not be.
Prosperia prioritizes the most recent financial statements, whether quarterly, semi-annual, or annual. If all three formats are available, the annual statement is favored because it is typically audited and provides a more comprehensive view.
Companies that are fully Shariah-compliant are exempted from accounting-based screens, subject to Shariah Board approval. These companies are considered Shariah-compliant regardless of their leverage ratios. Although the following characteristics are not exhaustive, companies are usually deemed compliant if they exhibit the following:
Disclaimer – Prosperia is just an advice and is not a blanket Fatwa authority! Hence the individual can decide to invest based on the recommendation provided by Prosperia Team. The people behind Prosperia will not be liable in any way on the judgment day of Qayamat in the hereafter or this world. If you ever doubt your investments and income activities, do always reach out to a trusted & reputed Aalim/Mufti of your particular Maslak for 100% assured advice.
Investments in securities markets are subject to market risks. Please read all related documents carefully.
