Degree
Master of Science in Islamic Banking & Finance
Department
Department of Finance
Faculty/ School
School of Business Studies (SBS)
Date of Submission
Fall 2023
Supervisor
Dr. Irum Saba, Associate Professor & Program Director MS-IBF, Institute of Business Administration, Karachi
Keywords
Shariah Stock Screening Criteria, Equity Market, Shariah compliant, Interest-free equity scripts, Islamic Capital Markets, KMI-30 Index, Pakistan Stock Exchange
Abstract
The rapidly growing Islamic financial capital market segment globally emerging with the simplification concepts. There are numerous Shariah Stock Screening criteria available at the globe to ascertain the Shariah compliance status of the listed scripts, such as Dow Jones, AAOIFI, MSCI, FTSE, S&P and KMI in Pakistan. The assessment criteria mostly consist of qualitative and quantitative fundamentals. A script is Shariah compliant if it passes all the defined criteria of applicable screening methodology even though it is evident that the script contains some portion of Shariah non-compliance elements in their financials e.g. under KMI Shariah stock screening criteria, if Interest Bearing Debt to Total Assets ratio is 27% the stock will be considered Shariah compliant because it is below the 37% threshold. The stakeholders of scripts may get various benefit by adding value to the results of Shariah stock screening upon re-composition period by defining the scripts with simplified logics (Md. Hashim et al., 2017).
In this study using descriptive research methodology, it is proposed to have scoring mechanisms that will fold the KMI Shariah stock screening results into a simple & single meaningful percentage of Shariah compliance of the respective scripts. It will enable stakeholders to compare the scripts in an easy manner to make the decision of buy, hold or divest based on the level of Shariah Compliance at which the script stands upon recomposition period e.g. Shariah compliant script- POL, listed on KMI-30 Index is 95% Shariah compliant.
Document Type
Restricted Access
Submission Type
Research Project
Recommended Citation
Hameed, A. (2023). Shariah compliance degree of listed scripts: proposed extension of Shariah stock screening criteria for gauging degree of Shariah Compliance (Unpublished graduate research project). Institute of Business Administration, Pakistan. Retrieved from https://ir.iba.edu.pk/etd-ms-ibf/27
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