Zoya screens stocks by applying established Shariah screening standards under the guidance of our Shariah advisors. The default standard is AAOIFI, but Zoya Pro subscribers can choose from additional globally recognized methodologies: S&P Shariah, MSCI Islamic, Dow Jones Islamic, and FTSE Russell Shariah.
Each of these was developed by scholars and institutions with slightly different approaches to thresholds, calculations, and business activity criteria, which is why a stock can pass under one standard and fail under another. For more on the differences, see our blog post on screening methodologies.
It's worth noting that our compliance assessments are based on our independent interpretation of these publicly available methodologies. We're not affiliated with the organizations behind them, and while we strive for accuracy, our results may vary from their official determinations.
How screening works
No matter which standard you use, Zoya runs two screens: a business activity screen and a financial screen. Think of the first as checking what the company does and the second as checking how it manages its money.
Business activity screen
This looks at how a company earns its revenue. Companies whose core products or services are prohibited in Islam, like alcohol, gambling, pornography, or interest-based financial products, are flagged as non-compliant.
In cases where a company's core business is permissible but a small portion of revenue comes from impermissible sources (for example, a supermarket that sells pork), most scholars agree the threshold is 5% of total revenue. The compliance report in Zoya breaks down non-compliant revenue by segment, based on the company's annual or quarterly filings.
Financial screen
The financial screen checks a company's balance sheet to make sure it isn't too reliant on interest-based financing or investments. The specific ratios vary by methodology, but they generally evaluate a few things: how much interest-bearing debt the company carries, how much it holds in interest-generating assets, and whether the company's value is backed by real, productive assets rather than cash and receivables (sometimes referred to as the liquidity ratio). Some methodologies check two of these, others check three or more.
For example, under AAOIFI, both interest-bearing debt and interest-bearing assets can't exceed 30% of the company's market cap. Other methodologies may use different denominators (like total assets instead of market cap), different thresholds, or evaluate additional ratios entirely.
These differences are one of the biggest reasons a stock can pass under one methodology and fail under another. Market cap-based approaches tend to be more favorable for asset-light companies like tech, while total asset-based approaches may better reflect capital-intensive industries like manufacturing.
You can see the exact ratios, thresholds, and underlying data for any stock by tapping the "See Full Report" button.
Where does the 30% threshold come from?
AAOIFI's 30% threshold traces back to a well-known hadith. Saad bin Abi Waqas narrates that when he asked the Prophet ﷺ whether he could bequeath two-thirds of his wealth, then half, then one-third, the Prophet ﷺ replied: "One-third, and one-third is much." (Al-Bukhari, hadith #5659)
From this, scholars derived the principle that one-third represents a "substantial" portion for the purposes of Shariah rulings. AAOIFI rounds down to 30%, while other methodologies may use 33% or 33.33%, staying closer to the literal one-third.