Ranking The Strictness Level Of Sharia Stock Screening Standards: A Comparative Analysis Of Global Sharia Stock Indices
Abstract
This study aims to rank the level of strictness in Sharia stock screening standards across five major indices DJIM, MSCI Islamic, FTSE Shariah, KLSI, and ISSI. The research uses a qualitative-comparative analysis with a weighted scoring approach based on five key indicators: debt ratio, non-halal income tolerance, prohibited sectors, purification mechanisms, and technical screening methods. The results show that DJIM and MSCI fall into the very strict category, FTSE and KLSI are moderate, while ISSI is categorized as lenient. This variation provides important insights for investors and regulators in assessing how far an index reflects Sharia compliance and prudential standards.
Keywords
Full Text:
PDFReferences
Adam, N. L., & Abu Bakar, N. B. (2014). Shariah screening process in Malaysia. Procedia - Social and Behavioral Sciences, 121, 113–123. https://doi.org/10.1016/ j.sbspro. 2014.01.1116
Adeyemi, A., & Tekdoğan, S. (2024). A critical evaluation of Shariah stock screening methodologies and governance challenges. Adem Akademi Sosyal Bilimler Dergisi, 8(1), 1–28. https://doi.org/10.31679/adamakademi.1415744
Akartepe, S. (2022). Institutional diversity and Shariah compliance: A comparative study. Journal of Islamic Finance and Management, 6(2), 55–70.
Ashraf, D., & Khawaja, M. (2016). Accounting discretion and Islamic screening. Journal of Financial Reporting and Accounting, 14(1), 2–22. https://doi.org/10.1108/JFRA-05-2014-0046
Ayedh, A. M., Mohamad, M., & Shahida, S. (2019). A critical review of Shariah screening methodologies in global Islamic equity indices. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3502622
Bousalam, A. (2016). Shariah stock screening: Discrepancies, issues, and harmonization. International Journal of Islamic Business Ethics, 1(1), 1–13.
Derigs, U., & Marzban, S. (2008). Review and analysis of current Shariah-compliant equity screening practices. International Journal of Islamic and Middle Eastern Finance and Management, 1(4), 285–303. https://doi.org/10.1108/17538390810919600
Dewandaru, G., Masih, R., & Rizvi, S. A. R. (2015). Screening methodology and the Sharīʿah-compliant performance differential: Evidence from global Islamic equity markets. International Journal of Islamic and Middle Eastern Finance and Management, 8(2), 190–217. https://doi.org/10.1108/IMEFM-03-2014-0026
El-Gamal, M. A. (2006). Islamic finance: Law, economics, and practice. Cambridge University Press.
Gamaleldin, I. (2015). Towards a standardized Shariah stock screening process: A review of the current practices. Journal of Islamic Finance, 4(1), 1–13.
Hanif, M. (2019). Sharī‘ah screening of equities: A conceptual framework for critical analysis. International Journal of Law and Management, 61(1), 22–37. https://doi.org/10.1108/IJLMA-01-2018-0010
Ho, C. S. F. (2015). A comparative study of Sharī‘ah screening methodologies in Malaysia. ISRA International Journal of Islamic Finance, 7(1), 49–72. https://doi.org/10.12816/0016913
Ibrahim, M. (2012). The legal maxims in Islamic financial contracts. ISRA International Journal of Islamic Finance, 4(2), 1–24.
Khatkhatay, M. H., & Nisar, S. (2007). Shariah compliant equity investments: An assessment of current screening norms. Islamic Economic Studies, 15(1), 47–76.
Masud, M. K. (2009). Shari‘a today: Essays on contemporary issues and problems. Berghahn Books.
Nainggolan, Y. (2015). Performance and volatility of shariah-compliant versus conventional stocks: Evidence from Indonesia. Jurnal Keuangan dan Perbankan, 19(1), 99–109.
Obaidullah, M. (2009). Screening norms for Shariʿah-compliant equities: An evaluation. Islamic Research and Training Institute, Islamic Development Bank.
Otoritas Jasa Keuangan. (2017). Peraturan OJK Nomor 35/POJK.04/2017 tentang Kriteria dan Penerbitan Daftar Efek Syariah. Jakarta: OJK. Retrieved from https://www.ojk.go.id
Pok, W. C. (2012). The performance of Syariah-compliant companies during the US subprime crisis: Evidence from Bursa Malaysia. International Journal of Islamic and Middle Eastern Finance and Management, 5(3), 237–251. https://doi.org/10.1108/17538391211255257
Raza, M. W. (2021). Does the choice of stock selection criteria affect the performance of Sharīʿah-compliant equity portfolios? ISRA International Journal of Islamic Finance, 13(2), 264–280. https://doi.org/10.1108/IJIF-07-2020-0139
Rizaldy, M., & Firmansyah, I. (2021). Is Sharīʿah screening methodology relevant to Muslim investors? Evidence from Indonesia stock market. International Journal of Islamic and Middle Eastern Finance and Management, 14(3), 543–566. https://doi.org/10.1108/IJIF-03-2020-0068
Sani, M. A. M., & Othman, A. (2013). Harmonisation of Shariah screening standards: A study on selected Shariah stock indices. Middle-East Journal of Scientific Research, 13(Special Issue), 72–79.
Shanmugam, B., & Zahari, Z. R. (2009). A primer on Islamic finance. Research Foundation of CFA Institute.
Tanin, R., Alam, N., & Rizvi, S. A. R. (2021). Revisiting Sharīʿah screening norms: A market perspective. Review of Financial Economics, 39(1), 12–25. https://doi.org/10.1002/rfe.1132
Yusof, R. M., & Majid, M. S. A. (2007). Stock market volatility transmission in Malaysia: Islamic versus conventional stock market. Journal of Islamic Economics, Banking and Finance, 3(1), 1–23.
DOI: http://dx.doi.org/10.35448/jiec.v9i1.32378
Refbacks
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Copyright © Syi’ar Iqtishadi: Journal of Islamic Economics, Finance and Banking.
