Shariah-Compliant Investing on PSX

A stock has to clear a qualitative screen first — its core business itself must be halal, which rules out conventional banking and insurance, alcohol, gambling, and similar sectors outright, regardless of its financial ratios.

Companies that pass then go through a quantitative screen, run jointly by PSX and Al Meezan Investment Management (the managers of the Meezan Islamic Fund) under a methodology approved by SECP. This is the same screen behind the KMI-30 and PSX-KMI All Share indexes, and the one StockPulse's own Shariah filter follows.

Broadly, the screen checks: how much of the company's financing is conventional interest-bearing debt relative to its total assets (capped well under half, with SECP having tightened this threshold in a 2026 methodology revision); how much of its assets are illiquid (property, equipment, inventory — generally required to be a meaningful share of the total, rather than mostly cash and receivables); how much of its investments and income come from non-compliant sources (both capped at a small single-digit-to-low-double-digit percentage); and whether its net liquid assets per share are below the current market price.

These exact thresholds get revised periodically by SECP as the methodology evolves — treat the specific numbers as directional rather than fixed, and check PSX's own published KMI methodology document for the current figures.

A company can fail Shariah screening purely on its balance sheet — too much debt or too many non-compliant investments — even with a perfectly halal core business. That's a useful read on balance-sheet conservatism for any investor, not just one specifically investing Islamically.

Even a Shariah-compliant company can earn a small amount of non-compliant income (bank interest on idle cash, for example) within the allowed threshold. Investors following Islamic investing principles typically "purify" their return by donating that proportional share of income to charity — this isn't something StockPulse calculates, but it's part of how the screening is meant to be used in practice.