Shari'ah Screening Methodology- New Shari'ah Compliant Approach

Ramazan Yildirim and Bilal Ilhan

MPRA Paper from University Library of Munich, Germany

Abstract: The purpose of this paper is to address to a long-standing criticism of the various Shari’ah screening methodologies implemented by Islamic index providers. This study aims to provide evidences derived from the Islamic sources (Qur’an and Sunnah) and offers a potential solution for the harmonization of Shari’ah screening methodologies. Strong evidences from the Qur’an reveal that the most righteous and fair judgment is provided when the only factors that are considered are the entirely endogenous factors. This study further emphasizes the importance of using a screening methodology that supports the main notions of Islamic finance as a whole, and adheres to the essence of the ayah (Al-Baqarah: 275). This study exhibits a potential towards the harmonization of Shari’ah screening methodologies which encourages the participation of Muslim investors by ensuring better awareness and confidence regarding stock investments. This paper fulfils an identified need to study how Shari’ah screening methodologies can be derived from the Islamic sources yet is based on “out-of-the-box” thinking.

Keywords: Shariah Screening; Islamic Equity Index; Market Capitalization; Total Debt; Quran & Sunnah (search for similar items in EconPapers)
JEL-codes: G11 G15 G18 (search for similar items in EconPapers)
Date: 2018-04
New Economics Papers: this item is included in nep-hme and nep-isf
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Citations: View citations in EconPapers (1)

Published in Journal of Islamic Economics, Banking and Finance 1.14(2018): pp. 168-190

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