AAOIFI Shari'a screening · Reviewed July 20, 2026
How to check if a stock is halal
The two-screen AAOIFI method scholars and halal platforms actually use: the business activity screen, the financial ratio screen (30% / 30% / 5%), purification, and why screeners sometimes disagree on the same stock.
To check if a stock is halal, apply the two screens of AAOIFI Shari'a Standard No. 21. First, the business screen: the company's core activity must be permissible, which excludes conventional banking and insurance, alcohol, gambling, tobacco, pork products, and adult entertainment. Second, the financial screen: interest-bearing debt must stay under 30% of market capitalization, interest-bearing deposits and securities under 30% of market capitalization, and non-permissible income under 5% of revenue. Pass both screens and the stock is investable, with a small purification of any interest income.
Step 1, the business activity screen. Look at where the company actually earns its revenue. If the core business is prohibited (a conventional bank or insurer, an alcohol producer, a casino or betting operator, a tobacco company, a pork processor, or an adult entertainment business), the stock is haram regardless of how good its financials look. Most companies fail here or pass here; it is the fastest filter.
Step 2, the financial ratio screen. Even a permissible business borrows and parks cash. AAOIFI Shari'a Standard No. 21 tolerates a limited amount: interest-bearing debt below 30% of market capitalization, interest-bearing deposits and securities below 30% of market capitalization, and non-permissible income (mostly interest earned) below 5% of total revenue. Worked example: Apple's interest-bearing debt is about 1.9% of market cap and its non-permissible income is under 1% of revenue, so it passes easily. IBM's debt sits near 26.6% of market cap, so it passes numerically but with little margin.
Step 3, purification. Passing the screens does not make interest income clean. Whatever small share of the company's income came from non-permissible sources must be given away: purification owed equals the non-permissible-income ratio multiplied by your dividends plus realized gains. For most large companies that works out to roughly 0.5% to 2%.
Why do screeners disagree on the same stock? Almost always the denominator. AAOIFI's thresholds are measured against market capitalization; HalalScreener uses the current market cap, while some platforms use a 24-month or 36-month trailing average, and a minority use total assets with a 33% cap. On borderline stocks (debt near the 30% line) those choices flip the verdict. A good screener shows you the ratio, the threshold, and the date, so you can see how close the call is instead of trusting a bare yes or no.
Step 4, keep it current. Ratios move with the share price and every quarterly report, so a stock screened a year ago is stale. HalalScreener screens any US-listed stock, ETF, or crypto (plus major global companies via their US ADRs) and shows the verdict, grade, and debt ratio free, so you can re-check your holdings in seconds whenever you need.
Methodology
Verdict applies the methodology of AAOIFI Shari'a Standard No. 21: Financial Papers (Shares and Bonds): qualitative screening for prohibited business activities, plus three quantitative caps. Interest-bearing debt < 30% of market cap, interest-bearing securities < 30%, and non-permissible income < 5% of revenue.
Sources and scholars
- AAOIFI Shari'a Standard No. 21: Financial Papers (Shares and Bonds)
- Wahed Invest Shari'a Supervisory Board
- Amana Mutual Funds (Saturna) Shari'a Supervisory Board
- Fiqh Council of North America (FCNA) on quantitative screening
Frequently asked
What makes a stock haram?
Either the business or the balance sheet. A stock is haram if the company's core activity is prohibited (conventional banking or insurance, alcohol, gambling, tobacco, pork, adult entertainment), or if it fails the AAOIFI financial limits: interest-bearing debt or interest-bearing securities at 30% or more of market cap, or non-permissible income at 5% or more of revenue.
What are the AAOIFI financial ratios for halal stocks?
Three limits from Shari'a Standard No. 21: interest-bearing debt under 30% of market capitalization, interest-bearing deposits and securities under 30% of market capitalization, and non-permissible income under 5% of total revenue. All three must pass.
Why do halal screeners disagree on the same stock?
Mostly the denominator. Some screeners divide debt by current market cap (HalalScreener's approach), others by a 24-month or 36-month average market cap, and a few by total assets with a 33% cap. On borderline stocks those choices produce different verdicts, which is why a screener should show you the actual ratio and date, not just a verdict.
How often should I re-check whether a stock is still halal?
Quarterly is the practical rhythm, since the ratios change with every earnings report and with the share price. Re-check before adding to a position, and re-check the whole portfolio at least once a year. HalalScreener re-screens covered stocks continuously and dates every verdict.