Abstract
This study highlights the issues in the screening process of Shar??ah-compliant stock universe from Shar??ah and professional perspectives. We have critically analyzed Shar??ah-compliance methodologies of selected (eight) institutions in the light of Islamic principles of business. The findings suggest multiple weaknesses in the process, including variations in tolerance limits (for ?ar?m-elements), variations in the use of calculation methods (total assets and market capitalization), insufficient income purification mechanism, and confusions about the application of bay? al-?arf and bay? al-dayn regulations. In addition, we find lack of revisions in the tolerance limits, corresponding to the expansion of the Islamic finance market. We also find that certain important areas, such as questionable marketing and sales practices and environmental damages, are ignored in filtration. This study proposes a Shar??ah-compliance rankings mechanism for Islamic stock markets, within agreed upon framework, based on the degree of violations.
