The purification ratio represents the percentage of dividends or investment income that a Muslim investor should donate to charity in order to cleanse their earnings from any non-permissible income generated by the company. Even stocks that pass Shariah compliance screening may derive a small portion of their revenue from impermissible sources.
The purification ratio is typically calculated by taking the sum of non-permissible income and interest income, dividing by total revenue or total income, and expressing the result as a percentage. If a company's purification ratio is 2.5%, then for every $100 in dividends received, $2.50 should be donated to charity.
Purification is an important part of maintaining a halal investment portfolio. It acknowledges the practical reality that very few public companies are 100% free from any non-permissible income, while still allowing investment in companies whose core activities are permissible. The purified amount is typically given as charity (Sadaqah) rather than counting toward Zakat.