The Shari’ah Advisory Council (SAC) of the Securities Commission Malaysia approves and updates shares classified as Shari’ah compliant Securities, listed on Bursa Malaysia.
The list is updated twice a year. The list provides investment reference for Islamic unit trust funds, Takaful funds, Islamic stock broking companies/services and investors looking for Shari’ah compliant investment.
The list shall meet several objectives as follows:Facilitate investors seeking investment in Shari’ah compliant shares listed on Bursa Malaysia.Centralisation of Shari’ah decisions domestically.Enhance disclosure and transparency.
Promote the development of Islamic Capital Markets.Encourage the development of Islamic instruments.What is the methodology used for screening?
The SAC screens listed shares based on certain methodology and the list is published twice a year. As a preliminary screening, companies which activities are not contrary to Shari’ah principles will be classified as Shari’ah compliant securities.
On the other hand, companies will be deemed as Shari’ah non-compliant if they are involved in the following core activitiesFinancial services based on riba (interest) Gaming and gambling Manufacture or sale of non-halal products or related productsConventional insuranceEntertainment activities that are non-permissible according to Shari’ahManufacture or sale of tobacco-based products or related products
Stock broking or share trading on Shari’ah non-compliant securities, andOther activities deemed non-permissible according to Shari’ahFor companies with activities comprising both permissible and non-permissible activities, the SAC measures level of mixed contributions from permissible and non-permissible activities towards turnover and profit before tax of a company. The SAC uses benchmarks based on Ijtihad (Shari’ah based reasoning). Where the contributions of non-permissible activities exceed the benchmark, the securities shall be classified as Shari’ah non-compliant.
The SAC also looks at two additional criteria, namely public perception that the company must be good, and the core activities of the company are important and considered maslahah (benefit) to the Muslim generally and the non-permissible activities are very small and involve matters such as umum balwa (common plight and difficult to avoid), uruf (custom) and the rights of Muslim community which are accepted by Islam.Please click here for more information.
Bursa Malaysia, in the context of Shari’ah screening process, has two comprehensive and transparent screening methodologies which are set up by SAC and Yasaar Ltd.
These screening methodologies that look at both quantitative and qualitative measures help us meet local requirements and align us with international standards.How many securities are Shariah compliant?
As at 25 May 2012, 825 securities are classified as Shari’ah compliant. They represent 89% of securities listed in Bursa Malaysia.