What industries are excluded from Islamic investing?
Common Shariah screens exclude businesses centred on activities such as conventional interest-based financial services, alcohol, gambling and pork-related products. Some methodologies also exclude areas such as tobacco or weapons, so the exact list can vary.
Business activity screening
A Shariah screen looks first at how a company earns its money. Companies whose main business is based on a prohibited activity are generally excluded from a Shariah-compliant investment universe.
Common exclusions
Common examples include conventional interest-based banking and lending, alcohol, gambling and pork-related products. Depending on the methodology, other activities such as tobacco, weapons or adult entertainment may also be excluded.
The important point is that not every screening methodology uses exactly the same list or definitions.
What about diversified companies?
Large companies can have several business lines. A methodology may therefore examine how much revenue comes from non-compliant activities and apply a tolerance for incidental income. The permitted threshold, calculation method and treatment of mixed activities can vary.
If incidental non-compliant income is permitted within the methodology, a purification calculation may also be required.
Why methodology matters
A fund or index described as Shariah-compliant should have a documented screening process. Looking at that methodology helps explain which sectors are excluded, how mixed revenue is treated and how often companies are reviewed.
Business screening is only one part of the process. A company with a permissible activity may still fail separate financial ratio screens.
This guide is general education, not personal financial advice.
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