Table I. Sharīʿah compliance... | Emerald Publishing

Table I.

Sharīʿah compliance requirements

Sectoral screening	Financial screening criteria	Financial instrument
IVC cannot invest in the following sectors: Alcohol Pork related Gambling Leisure Arms Tobacco Pornography Financial services Any other sectors deemed to be Sharīʿah non-compliant by the Sharīʿah Committee	Balance sheet-based screening The sum of cash and interest-bearing account should be less than 33% Receivables and cash should be less than 33% Total debt to total asset ratio should be less than 33% Income statement-based screening Total interest and non-compliant activities income should not exceed 5% of revenues However, there are minor variations in definitions of financial metrics suggested by practitioners/Sharīʿah scholars	IVC investments are barred from Investing in interest-bearing instruments Issuance of interest-based instruments Using financial derivatives Short selling Conducting any other Sharīʿah non-compliant activity

Sectoral screening	Financial screening criteria	Financial instrument
IVC cannot invest in the following sectors:AlcoholPork relatedGamblingLeisureArmsTobaccoPornographyFinancial servicesAny other sectors deemed to be Sharīʿah non-compliant by the Sharīʿah Committee	Balance sheet-based screeningThe sum of cash and interest-bearing account should be less than 33%Receivables and cash should be less than 33%Total debt to total asset ratio should be less than 33%Income statement-based screeningTotal interest and non-compliant activities income should not exceed 5% of revenuesHowever, there are minor variations in definitions of financial metrics suggested by practitioners/Sharīʿah scholars	IVC investments are barred fromInvesting in interest-bearing instrumentsIssuance of interest-based instrumentsUsing financial derivativesShort sellingConducting any other Sharīʿah non-compliant activity

Source: Authors’ contribution based on El-Gamal (2006) and Screening Methodology of Dow Jones Shariah Index