Comparison of quantitative Shariah-compliant screening methods

Abstract EN

Different screening methodologies have been developed in the market to screen for Shariah-compliant investments.

The Shariah screening processes are deemed important for investors to avoid prohibited activities and to select investments in permissible businesses in accordance with Islamic principles.

This paper reviews the Shariah investment screening methodologies of twenty-one worldwide prominent Islamic finance users, including index providers, Shariah service providers, fund managers and a regulator.

A comparative analysis is performed to highlight the differences and similarities of the Shariah-compliant methods and principles used by these renowned institutions.

The results reveal that different users have different objectives and functions, reflected in their different screening methods applied.

It is believed that greater harmonisation of the worldwide screening methods would assist in further accelerating growth of the Islamic investment sector.

This paper thus provides some suggestions on achieving a common and unified screening rule.