Business screening (also called sector or activity screening) is the qualitative component of Shariah compliance assessment. It evaluates whether a company's primary business activities are permissible under Islamic principles, independent of its financial ratios.
Companies whose core business involves prohibited activities are excluded outright. These typically include: conventional banks and insurance companies, alcohol producers and distributors, gambling operators, tobacco manufacturers, weapons producers, and companies in the adult entertainment industry. The screening is based on the company's sector, industry classification, and business description.
For companies in mixed sectors — where the primary business is permissible but some secondary activities may involve non-compliant elements — the financial screening and purification ratios come into play. A technology company, for example, may earn a small amount of interest income on its cash reserves, which would be addressed through the purification process rather than outright exclusion.