Methodology

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

4 standards (incl. MSCI M-Series) Live + cached screening DJIM 2-pp soft buffer MSCI 30%/33.33% asymmetric Methodology last verified vs primary sources: 2026-05-04

1. The three gates

A stock is Sharia-compliant under a given standard if and only if it passes all gates that the standard defines. Counts and rules differ by standard:

Gate 1 — Sector (business activity): the company's primary revenue must not come from prohibited industries. Sub-rules are per-standard (e.g. MSCI hard-excludes hotels GICS 25301020; DJIM tolerates Sharia-converting banks per Appendix A).
Gate 2 — Financial ratios: 2 ratios for AAOIFI, 3 for DJIM and MSCI. Denominators differ — AAOIFI uses live market cap, DJIM uses 24-month avg market cap, MSCI Series uses total assets, MSCI M-Series uses 36-month avg market cap.
Gate 3 — Haram revenue cap: non-permissible revenue (interest income, prohibited-activity revenue) must be < 5% of total revenue (or ≤ 5% per MSCI). The investor is then expected to purify that proportion of dividends received.

2. Gate 1 — Sector exclusions

The following sectors are universally excluded by AAOIFI, DJIM, and MSCI Islamic:

Conventional banking, mortgage finance, and conventional insurance (interest-based / contains riba)
Conventional asset management, brokerage, and capital markets
Alcohol production, distribution, and retail
Tobacco production and distribution (MSCI added cannabis to the tobacco bucket May-2019)
Cannabis (production, distribution, retail)
Pork-related products (producers, processors, retailers)
Pornography and adult entertainment (MSCI added online-dating Nov-2021)
Gambling, casinos, sports-betting, lottery (GICS 25301010)
Music and recording industries (DJIM/MSCI hard-exclude; AAOIFI permits production for educational only)

Per-standard differences on edge sectors

Where standards diverge on an edge sector, our engine honors the per-standard ruling (parsed from the affected_standards column of our GICS taxonomy):

Sector / GICS code	AAOIFI SS-21	DJIM	MSCI Islamic
Hotels & Resorts (25301020)	Review — alcohol revenue check	Excluded (entertainment cluster)	Hard-excluded (footnote 6: ex-Saudi)
Restaurants (25301040)	Review — alcohol revenue check	Excluded	Hard-excluded
Movies & Entertainment (50202010)	Review — explicit-content gate	Excluded	Hard-excluded
Broadcasting & Cable (50201020/30)	Review — content-type gate	Excluded	Hard-excluded
Aerospace & Defense (20101010)	Permits defensive use	Excluded	Hard-excluded
Takaful (Islamic insurance)	Permitted	Permitted (Appendix A exception)	Permitted (per IFI exception)

3. Gate 2 — Financial ratios (locked thresholds)

AAOIFI Sharia Standard No. 21 — 2 financial ratios

Interest-bearing debt ÷ live market capitalization	strictly < 30%
(Cash + interest-bearing securities) ÷ live market capitalization	strictly < 30%
Accounts receivable	not part of AAOIFI Standard 21
Haram revenue ÷ total revenue	strictly < 5%

Source: AAOIFI Shari'ah Standard No. 21 — Financial Paper (Shares and Bonds). Primary text is gated behind a paid AAOIFI e-Standards subscription; we cross-confirm via three independent advisory sources (Zoya / Halalsignalz / Tabadulat). The denominator is the live (point-in-time) market cap, not a trailing average — AAOIFI's rationale is that the screen evaluates what a shareholder is buying at the moment of purchase.

DJIM (Dow Jones Islamic Market)

Total interest-bearing debt ÷ trailing 24-month avg market cap	strictly < 33%
(Cash + interest-bearing securities) ÷ 24-month avg market cap	strictly < 33%
Accounts receivable (alone) ÷ 24-month avg market cap	strictly < 33%
Haram revenue ÷ total revenue	strictly < 5%
Buffer rule	Prior-period compliant stock stays compliant if ratio is within 2 percentage points of cap; 3 consecutive-period breach removes

Source: S&P Dow Jones Indices — Dow Jones Islamic Market Indices Methodology PDF (47-page primary document, methodology page 30). The 2-pp soft-buffer + 3-period removal rule is enforced by our engine on the daily-refresh cadence using the compliant_streak tracker.

MSCI Islamic Index Series (denominator = total assets)

Total debt ÷ total assets	≤ 33.33% (retention) / < 30% (new inclusion)
(Cash + interest-bearing securities) ÷ total assets	≤ 33.33% (retention) / < 30% (new inclusion)
(Accounts receivable + cash) ÷ total assets	≤ 33.33% (retention) / < 30% (new inclusion)
Haram revenue ÷ total earnings (incl. interest income)	≤ 5%

Source: MSCI Islamic Index Series Methodology, October 2024 (21-page primary PDF, §2.2 p.6–7). The asymmetric inclusion (30%) vs retention (33.33%) thresholds replace what some sources call a "buffer" and are MSCI's mechanism to limit constituent churn.

MSCI Islamic M-Series (denominator = 36-month avg market cap)

Total debt ÷ 36-month avg market cap	≤ 33.33% (retention) / < 30% (new inclusion)
(Cash + interest-bearing securities) ÷ 36-month avg market cap	≤ 33.33% (retention) / < 30% (new inclusion)
(Accounts receivable + cash) ÷ 36-month avg market cap	≤ 49% (retention) / < 46% (new inclusion)
Haram revenue ÷ total earnings	≤ 5%

Source: MSCI Islamic Index Series Methodology, October 2024 (§2.2 p.6, footnote 9). M-Series uses month-end mc averaging over the prior 36 months; if a constituent has <36 months of trading history, the average uses available months. The third-ratio AR+cash threshold is 49% on M-Series (vs 33.33% on the standard Series).

For constituents domiciled in GCC (ex-Saudi), Bangladesh, Egypt, Indonesia, Malaysia, Pakistan, Turkey: Sharia-compliant debt instruments (Sukuk) are excluded from both the numerator and the total-debt figure (§2.2 p.6).

4. Gate 3 — Purification (per standard)

The three standards specify three different purification approaches. Quintarthai surfaces all three so the investor can apply whichever their scholar / Sharia board endorses.

AAOIFI — investor-side dividend purification

purification_amount = (non_permissible_income ÷ total_income) × dividend_received

Example: a stock pays a $1.00 dividend and reports 0.3% haram revenue. The investor donates 0.003 × $1.00 = $0.003 per share to a qualified Islamic charity.

DJIM — informational ratio (not a compliance gate)

S&P DJI publishes a Dividend Purification Ratio alongside DJIM constituents (PDF footnote 9, p.31). It is the same arithmetic as AAOIFI but is explicitly labelled "not a compliance ratio" — the company has already passed the 5% revenue cap, so the purification figure is provided for the investor's reference rather than as a binding rule.

MSCI — Dividend Adjustment Factor (multiplicative)

dividend_adjustment_factor = (total_income − (prohibited_revenue + interest_income)) ÷ total_income

Per MSCI Methodology §2.3 p.7. The factor is applied multiplicatively to all reinvested dividends in MSCI's total-return Islamic index calculations — it is the proportion of the dividend the investor keeps, not the proportion donated. For a stock with 0.3% haram revenue, the MSCI factor is 1 − 0.003 = 0.997; the investor retains $0.997 of every $1.00 dividend.

Quintarthai surfaces all three calculations side-by-side. We do not enforce purification or remit donations on the user's behalf. 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 may donate to any qualified Islamic charity.

5. Data sources and primary references

Sector classification: GICS sub-industry codes from yfinance info.sectorKey/industryKey, mapped to our 39-row haram registry CSV. Default for unknown GICS codes is REVIEW (warn the user; never silent PASS).
Financials (numerators): yfinance balance-sheet keys — Total Debt, Cash Cash Equivalents And Short Term Investments (fallback: Cash And Cash Equivalents → info.totalCash), Accounts Receivable (fallback: Receivables), Total Assets.
Live market cap: info.marketCap. FX-normalized when info.currency ≠ info.financialCurrency (typical case: Tokyo-listed JPY balance sheet vs USD ADR mc).
Trailing 24-month avg market cap: mean of yfinance daily close over period="2y" × current shares outstanding (FX-applied if applicable). Used by DJIM.
Trailing 36-month avg market cap: month-end average over the last 36 months. Used by MSCI M-Series.
Haram revenue: derived from a curated mixed-business segment table (~100 names with multi-segment exposure: Marriott / Disney / Las Vegas Sands / etc.) plus interest-income line items from the income statement. Default 0% when no curated entry exists; this is conservative for the 5% gate.

Primary methodology references

AAOIFI Sharia Standard No. 21 — Financial Paper (Shares and Bonds). The primary text is gated behind a paid AAOIFI e-Standards subscription. We cross-confirm thresholds (30% / market-cap denominator / 5% revenue cap) via three independent advisory sources: Zoya, Halalsignalz, Tabadulat.
DJIM — Dow Jones Islamic Market Indices Methodology, S&P Dow Jones Indices. 47-page primary PDF; financial-ratio rules at p.30, sector exclusions Appendix A p.29-30, purification footnote 9 p.31, 2-pp buffer rule p.30. Direct S&P URL frequently returns HTTP 403 to bots; archived snapshot is byte-identical and retrievable via Wayback Machine.
MSCI Islamic Index Series Methodology, October 2024 revision. 21-page primary PDF, retrievable from MSCI's methodology landing. Section 2.1 (sector exclusions p.4-5), §2.2 (financial ratios p.6-7), §2.3 (Dividend Adjustment Factor p.7), §3.1-3.3 (quarterly review and constituent maintenance).

Methodology last verified against primary sources on 2026-05-04. We re-audit when any of the three publishers issues a methodology revision.

6. Update frequency and review cadence

Sharia screening runs in two modes:

Daily refresh: the active universe is re-screened nightly via Celery beat. Live market cap, balance-sheet items, and 24/36-month rolling averages are recomputed.
On-demand: any other TSX, TSX-V, NYSE, or NASDAQ ticker not in the universe is screened live the first time a user requests it. The result is then cached. First on-demand screen takes roughly 2-4 seconds; subsequent reads are instant.

Beyond the daily refresh, we honor each standard's review cadence:

DJIM: S&P reviews quarterly (Mar/Jun/Sep/Dec). Our engine tracks compliant_streak per ticker so the 2-pp soft buffer and 3-consecutive-period removal rule applies across review windows.
MSCI Islamic / M-Series: MSCI reviews quarterly (Feb/May/Aug/Nov). Asymmetric inclusion (30%) vs retention (33.33%) thresholds prevent constituent churn at the boundary.
AAOIFI: AAOIFI is a standard, not an index. We apply it daily without a buffer (point-in-time market cap is conservative).

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

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.