FAQs

Question

Why do we screen stocks further on Financial parameters after Screening them for their business?

Answer

This is because the charging and paying of interest is forbidden in Islam and most companies are involved in either receiving interest on their invested funds or paying interest on interest-based loans they have availed, or both the above. Both these activities are forbidden in Islam and need to be avoided completely. As interest-based transactions are widely prevalent in contemporary business, it may be difficult to find suitable companies (following the above norms) in whose shares a person can invest. Nevertheless, the infringement on the above counts should at least be restricted within certain limits. Financial screening is required to determine which companies are within the allowed restrictions (tolerances of compliance).