AAOIFI Shariah Standard 21 is the most widely adopted set of criteria for screening publicly listed equities for Shariah compliance. It defines three industry-level exclusions, three financial-ratio limits, and a dividend-purification calculation that together produce a halal-or-not verdict on a public stock.
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AAOIFI stands for the Accounting and Auditing Organization for Islamic Financial Institutions, a Bahrain-based standard-setter whose Shariah Standards are used by Islamic banks, fund managers, and index providers across the Gulf, Southeast Asia, and increasingly the United States and United Kingdom. Shariah Standard 21 governs equity instruments specifically. It says a public stock is permissible (halal) for a Muslim investor if (1) the company's core business avoids prohibited activities, (2) three financial ratios stay under defined limits, and (3) any small incidental non-permissible income is purified by donating an equivalent share of dividends to charity.
A company can have a permissible core business and still fail AAOIFI Standard 21 if its balance sheet leans too heavily on interest-bearing instruments. Three caps:
Total interest-bearing debt divided by the trailing 12-month average market capitalisation must stay under 30%. Captures conventional bank loans, bonds, and any explicitly interest-bearing liability. A company with too much riba-based financing fails this filter even if its core business is permissible.
Cash, short-term investments, and interest-bearing securities (treasury bills, bonds held as assets, money-market funds) divided by trailing 12-month average market capitalisation must stay under 30%. A company sitting on a large pile of interest-earning instruments effectively becomes a debt-fund proxy, which AAOIFI treats as outside the spirit of equity ownership.
Revenue from incidental non-permissible activities (interest income, alcohol sales, pork-related products, conventional insurance, gambling) divided by total revenue must stay under 5%. Above 5%, the company is treated as materially deriving income from haram sources. Below 5%, the small non-permissible portion is purified via the dividend-purification step.
Before the financial ratios are even checked, a company is rejected outright if its primary line of business sits in a prohibited industry. AAOIFI lists the canonical categories; the most commonly applied:
When a passing company still earns a small amount of non-permissible income (below the 5% cap), Standard 21 requires the investor to purify that share of their dividends by donating it to charity. The calculation is simple: multiply the dividend received by the non-permissible income ratio. If a company earns 2% of revenue from non-permissible sources and pays a $100 dividend, $2 of that dividend should be given away. The capital gain on the share price is not subject to purification; only realised dividend income is.
Purification is a per-shareholder responsibility, not a company-level action. invest-like publishes the non-permissible income ratio for every ticker so the calculation can be done at home.
invest-like ingests current fundamentals (Financial Modeling Prep, refreshed daily) and applies the three ratio caps directly to the reported numbers. Industry classification is mapped from the company's GICS sector and sub-industry tag. Non-permissible income attribution uses both the segment-revenue breakdown (when disclosed) and the LLM's reading of the latest 10-K for incidental interest and other haram streams. The pass-fail verdict, the three ratio values, and the purification ratio are all published on the /halal/ landing page and on every per-ticker halal page (e.g. /halal/aapl/).
The implementation follows AAOIFI's thresholds. Some Shariah supervisory boards apply stricter local variants (e.g. 25% debt cap, or tobacco fully excluded). invest-like emits the underlying ratios so you can re-evaluate under a stricter rule if your board uses one.
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The /halal/ surface runs the standard on every US-listed ticker with daily fundamentals and a clear pass-fail verdict.
Educational only. invest-like is not a Shariah supervisory board and does not issue fatwas. The published verdict implements AAOIFI's public standard computationally; always consult a qualified scholar for personal religious rulings.