What Is Riba and Why Does It Matter?
Riba (ربا) literally means "increase" or "excess" in Arabic. In Islamic finance, it refers to interest earned or charged on money or debt.
The Quran explicitly forbids riba in multiple verses:
"Allah will destroy riba (usury) and will give increase for Sadaqat (charity)." (Quran 2:276)
When you screen a stock for riba, you're checking:
- Does the company earn income from interest (lending, banking)?
- Does the company owe excessive interest-based debt?
- Would investing in this company make me complicit in riba transactions?
Choose the Methodology Before Calculating
There is no single universal set of five ratios. Recognized Sharia boards use different denominators and thresholds, so a calculation is meaningful only when it names the methodology and version being applied.
1. Interest-Bearing Debt
- Total-assets methods: Interest-bearing debt ÷ total assets
- Market-cap methods: Interest-bearing debt ÷ a specified 24- or 36-month average market capitalization
- Threshold: Commonly around one-third, but use the exact current standard
2. Cash and Interest-Bearing Securities
- Formula: Conventional cash and interest-bearing securities ÷ the methodology's denominator
- Threshold: FTSE Yasaar and MSCI's total-assets series use approximately one-third
3. Non-Compliant Revenue or Income
- Formula: Identified non-compliant revenue or income ÷ total revenue
- Threshold: Often 5%, with category definitions set by the methodology
- Rule: Do not estimate a pass when the company does not disclose enough segment detail
4. Accounts Receivable and Cash
- Formula: Receivables plus cash ÷ the methodology's denominator
- Threshold: 33.33%, 49%, or 50% depending on the selected standard
5. Qualitative Business Review
- Review products, customers, contracts, revenue ambiguity, and real-world uses.
- Keep qualitative concerns separate from deterministic ratios.
- Record missing disclosure instead of converting uncertainty into a fabricated number.
Step-by-Step Screening Guide: Real Example (Apple)
This current example uses Apple's Form 10-Q for the period ended March 28, 2026. All figures come from the same filing period, and the component below performs the arithmetic from stored source inputs rather than embedding percentages in article copy.
Current quantitative Sharia screen
Based on 10-Q figures for the period ended 2026-03-28; calculated 2026-07-12.
84,711 / 371,082
145,660 / 371,082
99,083 / 371,082
- Financial
- Fails
- Overall
- Fails
Debt and receivables pass, but cash plus identifiable interest-bearing securities are 39.25% of total assets, above the 33.333% limit.
- Financial
- Fails
- Overall
- Fails
Debt and receivables-plus-cash pass, but cash plus identifiable interest-bearing securities are above the 33.33% total-assets limit.
- Financial
- Fails
- Overall
- Fails
Identifiable conventional cash and interest-bearing instruments are above 33% of total assets. This is a calculation against the SAC ratios, not an official SAC classification of a U.S.-listed security.
- Financial
- Not calculated
- Overall
- Not calculated
A properly licensed and reproducible 24- or 36-month issuer market-cap history is not yet stored, so these methods are not estimated from a current spot price.
Business-activity disclosure
Apple's disclosed core business remains consumer devices, software, and digital services, which are not prohibited categories by themselves.
Limitation: Apple reports Services as one combined category and does not separately disclose revenue from potentially non-compliant content, payment products, or other screened activities. A defensible prohibited-revenue percentage cannot be calculated from this filing alone.
Purification
The filing reports net other income/expense but does not separately disclose non-compliant income. No purification percentage is published because deriving one from a net aggregate would be misleading.
Inputs, assumptions and primary sources
- Interest-bearing debt is commercial paper of 1,997 plus current term debt of 8,310 plus non-current term debt of 74,404.
- Interest-bearing securities are current and non-current marketable securities of 101,023 less 935 of mutual funds whose underlying classification is not disclosed in the filing.
- Accounts receivable includes 30,339 of trade receivables and 23,172 of vendor non-trade receivables.
- Revenue is the six-month total through March 28, 2026 so it aligns with the filing used for the balance-sheet inputs.
This is a reproducible financial screen, not a fatwa. A failed total-assets screen can coexist with a pass under a market-cap methodology. ZakatInvest keeps the qualitative assessment separate so numerical thresholds do not erase material context.
How to Interpret the Result
Apple's debt passes the total-assets standards shown above, while conventional cash and identifiable interest-bearing securities exceed their liquidity limits. The filing does not separately disclose the non-compliant income or Services revenue needed to calculate a defensible purification percentage or business-activity percentage.
The correct conclusion is therefore methodology-dependent, not a universal score. See the full Apple analysis for the preserved qualitative discussion alongside these figures.
Why the Old Shortcut Was Unsafe
A spot market capitalization, estimated interest income, and guessed prohibited-content revenue cannot be combined into an authoritative score. The denominator must match the named standard, market-cap methods require the prescribed historical averaging window, and unknown income must remain unknown until a reliable source discloses it.
Where to Find Financial Data
For U.S. Stocks:
- SEC.gov — Official 10-K filings (free, most reliable)
- Yahoo Finance — Quick summary data (free)
- Seeking Alpha — Financial analysis and metrics
- Investor Relations pages — Company's own investor site
- Finviz.com — Quick stock screening tool
For International Stocks:
- Company annual reports (investor relations pages)
- Bloomberg Terminal (paid, professional)
- Trading View (free financial data)
Common Screening Mistakes to Avoid
❌ Mistake 1: Using Total Debt Instead of Interest-Bearing Debt
Wrong: "The company has $500M debt, so I'll use that."
Right: Use interest-bearing debt only. Exclude operational liabilities (accounts payable, deferred revenue).
❌ Mistake 2: Ignoring Interest Income Entirely
Wrong: "Apple doesn't do banking, so it's automatically halal."
Right: Check interest income. Even tech companies earn interest on cash reserves.
❌ Mistake 3: Confusing Revenue Segments
Wrong: "Meta's advertising is automatically all permissible" or "all prohibited."
Right: Advertising is a mixed category. Meta's filing does not isolate revenue from screened advertisers, so disclose the limitation instead of inventing a prohibited-revenue percentage.
❌ Mistake 4: Overthinking Secondary Factors
Don't spend hours on: Exact minority shareholder treatments, theoretical ethical concerns, minor environmental issues.
Do focus on: The five core ratios (debt, interest, haram revenue, receivables, primary business).
Quick Reference: Stock Screening Checklist
- ☐ Is the primary business halal? (Check 10-K business description)
- ☐ Debt ÷ Market Cap < 33%? (Calculate from balance sheet)
- ☐ Interest Income ÷ Revenue < 5%? (From income statement)
- ☐ Haram Revenue < 5%? (From business segments)
- ☐ Receivables ÷ Assets < 49%? (From balance sheet)
- ☐ Any lawsuits or controversies affecting halal status? (News search)
- ☐ Required dividend purification? (Record interest income %)
When to Use Pre-Screened Lists Instead
Doing this for every stock takes 30-60 minutes per company. Consider using halal ETFs or Islamic investment apps that have professional screening teams.
However, knowing HOW to screen is valuable for:
- Verifying pre-screened lists
- Screening new companies not yet on lists
- Understanding why a stock is flagged
- Personal stock picks
Bottom Line
The five Sharia ratios are your framework for halal screening. Download a 10-K, extract five numbers, plug them into formulas, and make a decision. It takes practice but becomes natural quickly.
Rule of thumb: If more than one ratio fails, the stock is likely not halal. If all five pass, the stock is probably compliant—but always consider the primary business too.