How to identify Shariah-compliant securities

The term 'Shariah' translates directly from Arabic as ‘the clear, well-trodden path to water.' Adherents of the Muslim faith follow these laws, which govern aspects of their lives including food, prayer, and financial dealings.

Securities described as 'Shariah-compliant' refer to investments in companies that align with Shariah principles. These companies have been deemed permissible for investment under these principles.

To qualify as Shariah-compliant, a company must align its primary business and investment activities, as well as its financial standing, with the principles of Shariah.

However, companies operating in certain sectors cannot be considered Shariah-compliant due to the nature of their business activities. These sectors include alcohol, tobacco, pork-related businesses, adult entertainment, gambling, weapons manufacturing, and conventional banking and insurance.

If you see an icon depicting the star and crescent on a security's page, it signifies that the company is recognized as Shariah-compliant.