How Penny screens stocks for halal compliance

Layer 1 — Business activity

Companies whose core business is impermissible are excluded outright: conventional banking and insurance, alcohol, tobacco, gambling and casinos, adult content, defense, and pork production. We match on each company's industry classification.

Layer 2 — Financial ratios

Companies passing the business screen are evaluated against Penny's current internal thresholds:

• Interest-bearing debt ÷ market capitalization < 33%
• Cash + interest-bearing securities ÷ market capitalization < 33%
• Accounts receivable ÷ total assets < 49%
• Non-permissible or interest-derived income ÷ total revenue < 5% when separately reported

Important data gap: the current website dataset does not expose interest income as a separate line. Penny displays that check as not measured; it should not be read as a pass.

Three verdicts, not two

• Passes Penny's screen — passes the measured layers, with a 1–5 grade showing how far the company sits from each threshold. A 5 passes with wide margins; a 1 passes but sits near a limit and could flip in a future quarter.
• Review — we won't certify it either way: the industry is a genuine gray area where scholars differ (media, hotels, airlines, advertising), or public data was too thin to measure at least two ratios.
• Not Halal — a blocked industry or a measured ratio above its threshold. The app always shows which rule failed and the number behind it.

Data & freshness

Fundamentals and industry classifications come from Finnhub for US listings and Yahoo Finance for international listings (suffixed tickers such as THYAO.IS or BBCA.JK). Each website screening page shows its snapshot date. The app may refresh separately; never assume a static web result is current after a new filing or a large price move.

Primary references

Penny's model is informed by published Islamic-finance standards and index screening practices, while remaining its own simplified educational implementation. Methodologies differ and can change over time.

• AAOIFI Shari'ah Standard No. 21 — Financial Paper (Shares and Bonds)
• S&P Shariah Indices Methodology

Limitations

• Our current website data source doesn't expose interest income as a separate line; the result is disclosed as not measured rather than counted as proof of compliance.
• Receivables/assets is approximated from turnover ratios, which can understate total receivables slightly.
• We screen individual US-listed stocks; ETFs are matched against a curated list of sharia-screened funds.
• Purification amounts are conservative estimates (5% default when the interest share is unknown).
• Penny's methodology has not yet been certified by a sharia board. This is a transparent quantitative screen, not a fatwa — for a binding ruling, consult your scholar.