How AAOIFI Halal Stock Screening Works

AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) sets the global standard for Shariah-compliant equity screening. A stock passes AAOIFI screening if it meets 4 criteria: debt ratio below 33%, interest income below 5%, cash and interest-bearing securities below 33% of market cap, and the company's primary business activity is halal.

The 4 AAOIFI Screening Criteria

For a stock to be considered Shariah-compliant under AAOIFI standards, it must pass all four of the following financial and business activity screens:

Understanding Each Criterion

Criterion 1: Debt Ratio (< 33%)

This is often the most impactful screen. Many companies use debt financing extensively, and interest-bearing debt is prohibited (riba) in Islamic finance. The 33% threshold acknowledges that most publicly traded companies carry some debt, but limits exposure to a minority position. Companies in capital-intensive industries (utilities, telecommunications, real estate) may struggle to meet this criterion.

Criterion 2: Interest Income (< 5%)

Even companies with entirely halal operations may earn incidental interest from corporate bank accounts or short-term investments. The 5% threshold allows for this reality while ensuring interest income remains a negligible portion of revenue. If a stock passes this screen but has some interest income, the corresponding portion of dividends should be purified (donated to charity) through the tatheer process.

Criterion 3: Cash and Interest-Bearing Securities (< 33%)

This criterion examines the asset side of the balance sheet. A company holding large amounts of cash in interest-bearing accounts or investing heavily in bonds and fixed-income securities is generating impermissible returns on a significant portion of its value. The 33% cap ensures the majority of the company's value comes from productive halal assets.

Criterion 4: Business Activity (Halal)

This is a qualitative screen. Companies whose primary business involves the following are automatically excluded, regardless of their financial ratios:

• Conventional banking and financial services (interest-based lending)
• Conventional insurance (gharar — excessive uncertainty)
• Alcohol production or distribution
• Tobacco manufacturing
• Gambling and casinos
• Pork and pork-related products
• Weapons and defense (offensive weapons)
• Adult entertainment

Status Categories

Based on the screening results, Rafiq assigns one of three compliance statuses:

What "Questionable" Really Means

A stock classified as QUESTIONABLE is not definitively halal or haram. It typically means the company is near a threshold on one or more criteria — for example, a debt ratio of 31% when the limit is 33%, or interest income at 4.5% when the limit is 5%. Different scholars and Shariah boards may reach different conclusions on borderline cases.

Rafiq shows the exact ratios for each criterion so you can see precisely where the company stands. This transparency allows you to make an informed decision in consultation with your own scholar or Shariah advisor.

Financial ratios also change quarterly as companies report new earnings. A stock that is borderline today may shift to clearly compliant or non-compliant after the next quarterly filing.

Rafiq's Screening Data

Rafiq provides two layers of screening data:

• 2,127+ pre-screened stocks from the Dow Jones Islamic Market (DJIM) index and S&P 500 Shariah index. These stocks have been pre-approved by their respective Shariah boards and are available for instant lookup.
• Live screening for any publicly traded stock using real-time financial data from Financial Modeling Prep (FMP). Rafiq fetches the latest debt, revenue, and income statement data to calculate AAOIFI ratios on demand.

For the 45 most commonly searched stocks, Rafiq provides detailed ratio breakdowns and AI-generated compliance explanations to help you understand exactly why a stock received its classification.

Rafiq is an educational screening tool, not a licensed financial advisor or Shariah board. Screening results are based on publicly available financial data and may not reflect the most recent filings. Always verify with a qualified Shariah advisor before making investment decisions.