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

Yildirim, Ramazan and Ilhan, Bilal (2018): Shari'ah Screening Methodology- New Shari'ah Compliant Approach. Published in: Journal of Islamic Economics, Banking and Finance , Vol. 14, No. 1 (April 2018): pp. 168-190.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Shariah Screening, Islamic Equity Index, Market Capitalization, Total Debt, Quran & Sunnah
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation

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