Methodology

How Quintarthai computes Sharia compliance status for stocks against AAOIFI, Dow Jones Islamic, and MSCI Islamic standards.

3 standards Live screening 42 tickers cached + on-demand for any other Open methodology

1. The three gates

A stock is Sharia-compliant under a given standard if and only if it passes all three gates:

Gate 1 — Sector (business activity): the company's primary revenue must not come from prohibited industries.
Gate 2 — Financial ratios: three ratios — debt, cash + interest-bearing securities, and accounts receivable — must all fall below the standard's thresholds.
Gate 3 — Haram revenue cap: non-permissible revenue (typically interest income on cash) must be ≤ 5% of total revenue. The user is then expected to purify that proportion of dividends received.

2. Gate 1 — Sector exclusions

The following sectors are universally excluded by all three standards:

Conventional banking and conventional insurance (interest-based / contains gharar — uncertainty)
Alcohol production and distribution
Tobacco
Cannabis (production, distribution, retail)
Pork-related products
Pornography and adult entertainment
Gambling, casinos, sports-betting, lottery
Conventional asset management based on interest

Per-standard differences on edge sectors

Sector	AAOIFI	DJIM	MSCI Islamic
Hotels (with bars)	Excl. if alcohol > 5% rev	Excluded	Excl. if material alcohol
Music / entertainment	Excl. if explicit > 5%	Excluded	Permitted if not explicit
Cinemas	Permitted (educational)	Excluded	Permitted
Defensive weapons	Permitted	Excluded	Excluded
Takaful (Islamic insurance)	Permitted	Permitted	Permitted

3. Gate 2 — Financial ratios (locked thresholds)

AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions)

Interest-bearing debt	≤ 30% of trailing 24-month avg market capitalization
Cash + interest-bearing securities	≤ 30% of trailing 24-month avg market cap
Accounts receivable	≤ 49% of total assets
Haram revenue	≤ 5% of total revenue

Source: AAOIFI Shari'ah Standard No. 21 — Financial Paper (Shares and Bonds).

DJIM (Dow Jones Islamic Market)

Total debt	≤ 33% of trailing 24-month avg market cap
Cash + interest-bearing securities	≤ 33% of trailing 24-month avg market cap
Accounts receivable + cash (combined)	≤ 33% of trailing 24-month avg market cap
Haram revenue	≤ 5% of total revenue

Source: S&P Dow Jones Indices — Dow Jones Islamic Market Indices Methodology.

MSCI Islamic

Total debt	≤ 33.33% of total assets
Cash + interest-bearing securities	≤ 33.33% of total assets
Accounts receivable + cash (combined)	≤ 70% of total assets
Haram revenue	≤ 5% of total revenue

Source: MSCI Inc. — MSCI Islamic Index Series Methodology.

4. Gate 3 — Purification (advisory)

For passing companies that still earn some haram revenue (typically interest on cash holdings), the investor is expected to donate a proportion of any dividends received to charity. We compute:

purification_amount = haram_revenue_pct × dividend_received

Example: a stock pays a $1.00/share dividend and the company has 0.3% haram revenue (typical interest income on cash). The investor donates 0.003 × $1.00 = $0.003 per share to a recognized Islamic charity.

Quintarthai surfaces the calculation but does not enforce purification. Recommended Sharia-compliant charities include Islamic Relief Canada/USA, Zakat Foundation of America, ICNA Relief, HHRD, Penny Appeal, Charity Right, and Human Concern International. Users are free to donate to any qualified Islamic charity.

5. Data sources

Sector classification: GICS sub-industry codes via existing market-data feed
Financials: XBRL-parsed company filings (SEC EDGAR for US, SEDAR+ for Canada) with Yahoo Finance fallback
Trailing 24-month market cap: computed from daily Yahoo Finance close-price history
Haram revenue split: derived from segment reporting where available; otherwise estimated from interest-income line items

6. Update frequency

Sharia screening runs in two modes:

Cached: popular tickers (S&P 500, TSX 60, mega-caps, top ETFs) are pre-computed nightly at 03:00 UTC.
On-demand: any other TSX, TSX-V, NYSE, or NASDAQ ticker not in cache is screened live the first time a user requests it. The result is then cached and refreshed nightly. First on-demand screen takes roughly 2-4 seconds; subsequent reads are instant.

If a ticker cannot be resolved on Yahoo Finance (rare for primary listings), the screen returns a 404 with a hint to add .TO or .V for Canadian listings (e.g. RY for Royal Bank, SHOP for Shopify).

7. Reversibility and recourse

If a user disagrees with a pass/fail call, they can:

Switch standards (the same stock may be PASS under AAOIFI but FAIL under DJIM)
Consult their qualified scholar or Sharia board for a final determination
Email the platform team with concerns: sharia@quintarthai.com

8. Out of scope (V1)

Sukuk (Islamic bonds) screening — different methodology
Real-time intraday status — daily refresh sufficient for screening
User-defined custom thresholds (Phase 7 future)
Currency-specific zakat rate calculation

9. Disclaimer

Educational use only. Sharia compliance must be confirmed with your qualified scholar or Sharia board. Three standards are surfaced (AAOIFI, DJIM, MSCI Islamic); each has different criteria. Quintarthai is not a religious authority and does not issue fatwas. Pass/fail status is computed deterministically against published standard methodology, not derived from any individual scholar's opinion.