Companies engaged in conventional interest-based financial services are considered non-permissible for investment by Shariah-compliant investors.

Following financial services businesses are considered non-compliant:

Commercial banks Investment banks Mortgage Lenders Mortgage agencies Capital markets including stock exchanges Speciality finance houses Financial brokerage agencies Investment management firms/agencies Stockbrokers Pawn shops/agencies Mutual funds and all other financial funds Underwriters

Insurance companies

Insurance agencies

Insurance brokers

Exceptions:

Islamic Banks

Islamic Financial Institutions

Islamic Insurance Companies

The above businesses are those which have:

1). A Shariah Committee or Shariah scholar who supervises all business activities and products of the company and certifies the same as Shariah-compliant

2). All products of the company are certified as Islamic either by an internal scholar or board of scholars or by an external Shariah Advisory firm

3). All investments and non-operating business activities of the company are Islamic

4). The company must pass all accounting based screens

Look out for:

1). Companies which have compliant products but derive non-operating income [other than interest income] from non-permissible investment activities.

Example: Islamic insurance companies which sell only Takaful products may invest their shareholder’s funds in conventional financial instruments deriving non-permissible incomes. Such insurance companies are not considered Shariah compliant.

2). An Islamic financial institution which derives all its revenues from Islamic products, maintains all its investments in a Shariah-compliant manner but does not have a Shariah supervisory board or a Shariah scholar supervising its activities; such a company will be considered non-compliant. The requirement of Shariah scholar’s supervision is obligatory.

Screening for Transitional Financial Services Companies from Conventional to Shariah

We offer services for screening for those companies that are willing to convert their conventional business to Shariah based on the below criteria and guidelines.

We will also provide such services based on the customised guidelines suggested by the clients and theirs Shariah Supervisory Board.

Criteria for Conventional Banks, Insurance companies and Financial Institutes under the process of conversion towards shariah are:

Should have a complete roadmap for conversion of conventional and liabilities towards shariah within the stipulated time frame given by the shariah board. All the activities regarding the conversion must be carried out under the supervision of Shariah board. Such companies must have internal or external shariah board. Revenues derived from non-compliant activities must be purified and given to the charity.

If a company under transition follows the criteria stated above, it will be considered as shariah compliant.