Chapter 10 of 12 · 15 min
Shariah screening, step by step
The exact AAOIFI and S&P/DJIM rules — the engine behind every verdict here.
Chapter 9 gave the principles. This chapter gives the procedure — the same one Gennoor Invest's engine runs on every stock, so by the end you can verify any verdict by hand.
Step 1 — the business activity screen
- Core business check. If the company's primary business is prohibited (conventional banking/NBFC, insurance, alcohol, tobacco, gambling, pork, adult content, conventional broking) → Non-Compliant. Stop.
- Mixed income check. Otherwise, add up income from any prohibited activities *plus all interest income*. If this exceeds 5% of total revenue → Non-Compliant. (The 5% tolerance exists because in a riba-saturated economy, perfect zero is nearly impossible; the tolerated sliver must be purified, never kept.)
Step 2 — the financial ratio screens
Two main standards dominate worldwide. They ask the same three questions with slightly different arithmetic:
| Question | AAOIFI standard | S&P / Dow Jones Islamic |
|---|---|---|
| Too much interest-bearing debt? | Debt < 30% of market cap | Debt < 33% of 36-month avg market cap |
| Too much parked in interest? | Interest-bearing investments < 30% of market cap | Cash + interest securities < 33% of 36-mo avg market cap |
| Too much in receivables? | — (not screened) | Receivables < 33% of 36-mo avg market cap |
🎛 Try it: Be the screening engine
This is the real AAOIFI logic this site runs. Drag a company's finances and flip the verdict yourself.
Worked example: a company with market cap ₹50,000 crore and borrowings of ₹12,000 crore has a debt ratio of 24% → passes both standards. If borrowings were ₹17,000 crore (34%) → fails both. At ₹15,500 crore (31%) it passes AAOIFI's cap-based test but sits near the line — which is why Gennoor Invest marks borderline cases Doubtful and sends them for human review instead of silently rounding.
Why verdicts can change — and differ
- Market cap moves daily. A compliant company whose share price halves can breach the debt ratio without borrowing a rupee more. Screening is a *recurring* check, not a lifetime stamp.
- Standards differ. A stock can pass AAOIFI and fail S&P/DJIM. Neither is "wrong" — they are different scholarly calibrations. Pick one standard and be consistent.
- Companies change. A compliant business can acquire an NBFC, or pay down debt and become compliant. Annual reports reset the inputs.
☪️ Why Gennoor Invest shows its working
A verdict you cannot verify is just someone's opinion. Every verdict on this site displays the screen-by-screen result, the exact figures, and the filing they were extracted from — and data reviewed by a human is labelled as such. If your scholar follows a stricter threshold, the raw numbers are right there to re-screen against any standard.
🛠 Build the skill — verify a verdict by hand
- Open any compliant stock's page on Gennoor Invest and note its debt and market cap figures.
- Divide debt by market cap on your phone calculator. Confirm it is under 30%.
- Open the cited annual report page and find the borrowings figure. Match it.
- You have now personally audited a Shariah screen — something most investors never do once.
📌 Remember
- Screen = business check (prohibited? mixed income < 5%?) + ratio checks (debt, interest assets, receivables).
- AAOIFI uses 30% of market cap; S&P/DJIM uses 33% of 36-month average. Verdicts can legitimately differ.
- Compliance is a recurring state, not a permanent badge — re-screen what you hold.
- Demand evidence. Black-box verdicts deserve skepticism.
✅ Check yourself
5 quick questions — answer honestly, learn instantly.
USE CASE1. Market cap ₹40,000 cr, interest-bearing debt ₹13,500 cr. Under AAOIFI (30% limit) the stock is…
USE CASE2. A hotel chain earns 3% of revenue from its bar. Business screen result…
3. A compliant company's share price halves in a market crash; its debt is unchanged. It can become non-compliant because…
4. Stock passes AAOIFI, fails S&P/DJIM's receivables screen. The correct conclusion…
5. The single most important feature a Shariah screening service can offer is…