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Scope
Transactions in an Islamic Capital Market should be
free from the involvement of prohibited activities
by Islam as well as free from the elements such
as usury (riba), gambling (maisir) and ambiguity
(gharar)
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participation is Shirkah
Stocks are classified as Shariah
compliant if their business activities do
not fall in the prohibited list prescribed
by Shariah Scholars
Certain financial ratios are also applied
for screening.
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services
Conventional insurance
Tobacco,
Indecent Entertainment
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Financial Ratios:
Main ratios applied are
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Islamic Funds
Islamic Bonds
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Net Liquid Assets vs. Share Price: The net liquid assets per share
should be less than the market price of the share.
Purification Requirement
It is necessary to purify the earnings by deducting
from the returns on the investments those
earnings emanating from an unacceptable source
from a Shariah point of view.
In context of equity investment according to
Shariah standards it is obligatory to eliminate
prohibited income that is mixed up with the
earnings of the company and this obligation is on
the one who is the owner of the shares.
Purification Requirement
Elimination is not obligatory for the intermediary,
agent or manager out of part of their commission
or wages because this is their right in lieu of the
work they have undertaken.
In case of Fund Management it is responsibility
of the Management Company to eliminate the
prohibited income.
According to Shariah Standards for the
determination of the percentage of prohibited
income the recourse should be the last verified
financials position.
Purification Requirement
Quantitative Screening
Criteria
The basic business of the investee company
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Quantitative Screening
Criteria
Total investment of the investee company
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JAZAKALLAH
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