Shariah Screening

Our approach to Sharia compliance draws on the resources of some of the world’s leading Islamic scholars, coupled with the strength of MSCI Global ESG research.

We adhere to Shari’ah priciples of investing by referring to a globally accepted Rule Book approved by the world’s most widely respected and distinguished scholars in the field of Islamic Finance. Amongst these scholars are Dr. Hussain Hamid Hassan, Dr. Abdul Sattar Abu Ghuddah, Dr. Ali Al Quradhaghi, Dr. Mohamed Elgari, and Dr. Mohd. Daud Bakar. Our compliance process includes business and financial screening in accordance with the abovementioned guidelines. We also provide dividend income purification for any income derived from incidental prohibited activities.

 

Business Activity Screening

MCCA First Guardian Super will not invest in companies, which are directly active in, or derive more than 5% of their revenue (cumulatively) from, the following activities (“prohibited activities”):

 MCCA Prohibition

Dividend Screening

If an asset holding derives part of its total income from interest income and/or from prohibited activities, Sharia investment principles state that this proportion must be deducted from the dividend or income paid out to stakeholders and given to charity.  MCCA First Guardian Super will apply a “dividend/income adjustment factor”. In this formula, total earnings are defined as gross income, and interest income is defined as operating and non-operating interest. MCCA First Guardian will review the “dividend/income adjustment factor” on a quarterly basis.  The concept of ‘purification’ in relation to an investment is applicable where the non-compliant income is 5% (or less) of the total revenue. If the non-Shariah compliant income is more than 5%, then the stock is deemed to be non compliant and the equity position is not established.

 

Financial Screening

Islamic investment principles do not allow investment in companies deriving significant income from interest or companies that have excessive leverage. MCCA First Guardian uses financial ratios such as total debt over total assets, to screen for these companies. Should this financial ratio exceed 33.33% then the security will be considered non-compliant.

 

For more info regarding Shariah Screening please refer to our Members Guide