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.
Related Terms
Financial Screening
The process of evaluating a company's financial ratios — debt, interest income, and cash — against Shariah compliance thresholds.
Shariah-Compliant Stocks
Stocks that pass both business activity and financial ratio screens according to Islamic finance standards like AAOIFI.
Halal Investing
Investment practices that comply with Islamic principles — avoiding interest (riba), excessive uncertainty (gharar), and prohibited industries.
Haram Income(حرام)
Income derived from sources that are prohibited under Islamic law, such as interest (riba), gambling, or alcohol sales.
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