1. Introduction: What is Shariah Law?
Before we learn about Halal Stocks, we should know about Shariah.
Shariah is the religious law system in Islam that tells individuals how to live their lives in accordance with Islamic principles. In this blog, we're only focusing on one specific area that is Shariah compliant stocks, also called as Halal Stocks. If you’re looking for shariah compliant Saudi stocks trading advice, understanding the basics of Shariah law and stock selection is essential. We’ll explain how you can identify, select, and trade stocks that fit your ethical and religious requirements. For your ease of finding, this article specifically covers all Shariah compliant stocks listed on the Tadawul—helping you form confident, faith-based investment strategies.
Shariah finance is one of the important requirements in Islam that Muslims must follow. This means that every financial transaction or business deal a Muslim does should follow Islamic religious rules (Shariah Law).
In even simpler terms: Just like how different religions have their own guidelines for living, Islam has specific rules about money and business. Muslims who want to invest in the stock market need to make sure their investments don't go against their religious beliefs. So there are special guidelines that help them choose which stocks are okay to buy and which ones they should avoid according to their faith.
2. What are Halal stocks?
Shariah compliant stocks / Halal stocks refer to shares of companies that comply with Islamic principles as outlined in Shariah law.
Investing in such stocks is a key component of Islamic finance, which emphasizes ethical and socially responsible investing. The concept ensures that investments do not involve prohibited (haram) activities and adhere to specific financial ratios.
Even if a company gets a small amount of money (less than 5%) from prohibited (haram) activities, it can still be considered okay to invest in.
Simple Example: Imagine a large supermarket chain. Even if they sell a tiny amount of alcohol alongside thousands of other products, and this represents less than 5% of their total earnings, a Muslim investor might still be able to buy shares in this company according to Islamic guidelines.
The main goal is to ensure that the majority of the company's business aligns with Islamic values and principles.
3. Shariah Guidelines For Trading And Investing in Stocks
Many individuals wonder if they are allowed to buy and sell stocks according to Islamic law.
The Answer is YES! They can definitely trade stocks, but only if those stocks follow Islamic rules that have been approved by Islamic religious scholars and experts.
Islam has some clear rules about what kinds of businesses are not allowed:
- Prohibition of Riba (Interest): Investments must avoid interest-based transactions, as earning or paying interest is prohibited in Islam.
- Avoidance of Gharar (Excessive Uncertainty): Investments should not involve excessive uncertainty or speculation.
- Ethical and Social Responsibility: Companies involved in unethical or harmful activities (e.g., selling alcohol, pork, tobacco, weapons, gambling) are against Shariah Law.
- Asset-Backed Investments: Investments should be tied to tangible assets or services, avoiding purely monetary transactions.
- Traditional Banking and Insurance: Companies involved in conventional banking and insurance activities are excluded from Shariah Law.
Any company involved in the above activities and the revenue from them exceeds 5% is out for investment.
If the revenue from above mentioned activities is below 5% of total income, then the stock will be further evaluated for Financial Ratio Screening.
It's nearly impossible to find companies that are 100% perfectly clean according to these rules. Almost every big company might have some small connection to prohibited activities.
Shariah scholars (religious experts) understood this problem, and thus they created a practical system. They developed specific guidelines and standards that help individuals figure out which stocks are "good enough" to invest in, even if the companies aren't perfectly clean.
This makes it possible for Muslims to participate in the stock market while still following their religious beliefs.
4. Shariah Stock Screening: How to know if the stock is Halal?
Shariah screening is a process of filtering stocks according to Shariah standards created by Islamic experts / Shariah scholars. Any company that is involved in prohibited (haram) activities is out of Shariah Compliant investments.
To determine if a stock is Shariah-compliant, a two-tier screening process is typically used:
A. Business Activity / Sector Screening:
- Exclusion of Non-Halal Activities: Companies involved in prohibited industries (e.g., alcohol, gambling, conventional banking, entertainment, pork-related products) are excluded.
- Focus on Halal Activities: Companies must derive the majority of their income from permissible activities, such as technology, healthcare, manufacturing, and halal food production.
B. Financial Ratio / Accounting Screening:
- Debt-to-Asset Ratio: A company’s total debt should not exceed 30% of its market capitalization.
- Interest-Bearing Securities: Investments in interest-bearing securities should not exceed 30% of the company’s market capitalization.
- Illiquid Assets: At least 20% of the company’s assets should be in tangible, non-monetary form.
5. What are Shariah Boards? Roles, Responsibilities, and Significance
Shariah Boards, also known as Shariah Supervisory Boards, are groups of Shariah / Islamic scholars with expertise in Islamic jurisprudence (Fiqh) and finance. They are responsible for ensuring that Islamic financial institutions and products comply with Shariah principles.
Shariah Boards are typically independent bodies, often composed of at least three scholars specializing in Islamic jurisprudence. The board's decisions are usually binding on the institution.
Their role is crucial in the Islamic finance industry, as it provides assurance to Muslims that their financial dealings adhere to their religious beliefs.
6. Benefits of Investing in Halal Stocks
- Ethical Alignment: Investment in Halal stocks ensures that the invested money goes towards making life easier without harming anyone.
- Risk Management: The accounting screening process often leads to investments in financially stable and low-risk assets/stocks.
- Diversification: Halal stocks span various sectors, providing diversification opportunities.
- Growing Market: The global Islamic finance industry is expanding, offering more opportunities for Shariah-compliant investments.
7. Challenges to Trading and Investing in Halal Stocks
- Limited Investment Options: The pool of Shariah-compliant stocks may be smaller, especially in non-Muslim-majority countries.
- Complex Screening Process: The need for thorough screening can make it challenging for individual investors to identify halal stocks.
- Performance Variability: Halal stocks may underperform conventional stocks in certain market conditions due to sector restrictions.
8. Shariah Compliant Halal Stocks in the Saudi Market Tadawul
Glass Products
- 4144 - Raoom Trading Co.
- 4145 - Obeikan Glass Co.
- 2150 - The National Company for Glass Industries
Financial services
- 4084 - Derayah Financial Co.
Telecommunications
- 7040 - Etihad Atheeb Telecommunication Co.
- 7030 - Mobile Telecommunication Company Saudi Arabia
- 7020 - Etihad Etisalat Co.
- 7010 - Saudi Telecom Co.
Consumer Goods
- 6017 - Jahez International Company for Information System Technology
Financing
- 4083 - United International Holding Co.
- 4082 - Morabaha Marina Financing Co.
- 4081 - Nayifat Finance Co.
- 1182 - Amlak International Finance Co.
- 1183 - SHL Finance Co.
Securities markets
- 1111 - Saudi Tadawul Group Holding Co.
Health Care Services
- 4014 - Scientific and Medical Equipment House Co.
Banking
- 1150 - Alinma Bank
- 1120 - Al Rajhi Bank
- 1140 - Bank Albilad
- 1080 - Arab National Bank
- 1020 - Bank Aljazira
Petrochemicals
- 2250 - Saudi Industrial Investment Group
- 2290 - Yanbu National Petrochemical Co.
- 2170 - Alujain Corp.
- 2010 - Saudi Basic Industries Corp.
- 2020 - SABIC Agri-Nutrients Co.
- 2210 - Nama Chemicals Co.
- 2060 - National Industrialization Co.
- 2330 - Advanced Petrochemical Co.
- 2310 - Sahara International Petrochemical Co.
- 2350 - Saudi Kayan Petrochemical Co.
- 2001 - Methanol Chemicals Co.
- 2380 - Rabigh Refining and Petrochemical Co.
Oil & Gas
- 2381 - Arabian Drilling Co.
- 2223 - Saudi Aramco Base Oil Co.
- 2382 - Ades Holding Co.
- 2080 - National Gas and Industrialization Co.
- 4050 - Saudi Automotive Services Co.
- 4200 - Aldrees Petroleum and Transport Services Co.
- 2222 - Saudi Arabian Oil Co.
Cement
- 3092 - Riyadh Cement Co.
- 3005 - Umm Al-Qura Cement Co.
- 3010 - Arabian Cement Co.
- 3080 - Eastern Province Cement Co.
- 3040 - Qassim Cement Co.
- 3030 - Saudi Cement Co.
- 3050 - Southern Province Cement Co.
- 3090 - Tabuk Cement Co.
- 3020 - Yamama Cement Co.
- 3060 - Yanbu Cement Co.
- 3091 - Al Jouf Cement Co.
- 3004 - Northern Region Cement Co.
- 3002 - Najran Cement Co.
- 3003 - City Cement Co.
Retail and Trade
- 4160 - Thimar Development Holding Co.
- 4180 - Fitaihi Holding Group
- 4190 - Jarir Marketing Co.
- 4001 - Abdullah Al Othaim Markets Co.
- 4240 - Fawaz Abdulaziz Alhokair Co.
- 1214 - Al Hassan Ghazi Ibrahim Shaker Co.
- 4006 - Saudi Marketing Co.
- 4003 - United Electronics Co.
- 4163 - Aldawaa Medical Services Co.
- 4008 - Saudi Company for Hardware
- 4011 - Lazurde Company for Jewelry
- 4161 - BinDawood Holding Co.
- 4051 - Baazeem Trading Co.
- 4191 - Abdullah Saad Mohammed Abo Moati for Bookstores Co.
- 4012 - Thob Al Aseel Co.
- 4193 - Nice One Beauty Digital Marketing Co.
- 4165 - Al Majed Oud Co.
- 4164 - Nahdi Medical Co.
- 4192 - AlSaif Stores for Development and Investment Co.
Pharmaceuticals Suppliers
- 2230 - Saudi Chemical Co.
- 1212 - Astra Industrial Group
- 4016 - Middle East Pharmaceutical Industries Co.
- 4015 - Jamjoom Pharmaceuticals Factory Co.
- 2070 - Saudi Pharmaceutical Industries and Medical Appliances Corp.
Sports Centers
- 1830 - Leejam Sports Co.
Health care
- 4005 - National Medical Care Co.
- 4007 - Al Hammadi Holding
- 4017 - Dr. Soliman Abdel Kader Fakeeh Hospital Co.
- 4009 - Middle East Healthcare Co.
- 4013 - Dr. Sulaiman Al Habib Medical Services Group
- 4019 - Specialized Medical Co.
- 4018 - Almoosa Health Co.
- 4002 - Mouwasat Medical Services Co.
- 4004 - Dallah Healthcare Co.
Education and Training
- 4292 - Ataa Educational Co.
- 4291 - National Company for Learning and Education
- 4290 - Alkhaleej Training and Education Co.
Food and Beverages
- 2284 - Modern Mills for Food Products Co.
- 2287 - Arabian Company for Agricultural and Industrial Investment
- 2282 - Naqi Water Co.
- 2283 - First Milling Co.
- 6015 - Americana Restaurants International PLC - Foreign Company
- 2281 - Tanmiah Food Co.
- 6016 - Shatirah House Restaurant Co.
- 6014 - Alamar Foods Co.
- 2285 - Arabian Mills for Food Products Co.
- 2286 - Fourth Milling Co.
- 4162 - Almunajem Foods Co.
- 6013 - Development Works Food Co.
- 6012 - Raydan Food Co.
- 6002 - Herfy Food Services Co.
- 6004 - CATRION Catering Holding Co.
- 6001 - Halwani Bros. Co.
- 2050 - Savola Group
- 2270 - Saudia Dairy and Foodstuff Co.
- 2280 - Almarai Co.
- 2100 - Wafrah for Industry and Development Co.
- 6010 - National Agricultural Development Co.
Agriculture
- 4061 - Anaam International Holding Group
- 6020 - Al Gassim Investment Holding Co.
- 6040 - Tabuk Agricultural Development Co.
- 6050 - Saudi Fisheries Co.
- 6060 - Ash-Sharqiyah Development Co.
- 6070 - Al-Jouf Agricultural Development Co.
- 6090 - Jazan Development and Investment Co.
Diversified Financials
- 4140 - Saudi Industrial Export Co.
- 4080 - Sinad Holding Co.
- 2030 - Saudi Arabia Refineries Co.
- 2120 - Saudi Advanced Industries Co.
- 4130 - Saudi Darb Investment Co.
- 2140 - AYYAN Investment Co.
- 1832 - Sadr Logistics Co.
Power and Utilities
- 2082 - ACWA POWER Co.
- 2084 - Miahona Co.
- 5110 - Saudi Electricity Co.
- 2083 - The Power and Water Utility Company for Jubail and Yanbu
- 2081 - Alkhorayef Water and Power Technologies Co.
Insurance
- 8260 - Gulf General Cooperative Insurance Co.
- 8250 - Gulf Insurance Group
- 8240 - CHUBB Arabia Cooperative Insurance Co.
- 8200 - Saudi Reinsurance Co.
- 8160 - Arabia Insurance Cooperative Co.
- 8300 - Wataniya Insurance Co.
- 8310 - Amana Cooperative Insurance Co.
- 8311 - Saudi Enaya Cooperative Insurance Co.
- 8012 - Aljazira Takaful Taawuni Co.
- 8120 - Gulf Union Alahlia Cooperative Insurance Co.
- 8020 - Malath Cooperative Insurance Co.
- 8180 - Al Sagr Cooperative Insurance Co.
- 8170 - Al-Etihad Cooperative Insurance Co.
- 8060 - Walaa Cooperative Insurance Co.
- 8040 - Mutakamela Insurance Co.
- 8030 - The Mediterranean and Gulf Insurance and Reinsurance Co.
- 8100 - Saudi Arabian Cooperative Insurance Co.
- 8270 - Buruj Cooperative Insurance Co.
- 8230 - Al-Rajhi Company for Cooperative Insurance
- 8280 - LIVA Insurance Co.
- 8150 - Allied Cooperative Insurance Group
- 8210 - Bupa Arabia for Cooperative Insurance Co.
- 8070 - Arabian Shield Cooperative Insurance Co.
- 8050 - Salama Cooperative Insurance Co.
- 8190 - United Cooperative Assurance Co.
- 8010 - The Company for Cooperative Insurance
Industrial Manufacturing
- 2160 - Saudi Arabian Amiantit Co.
- 2110 - Saudi Cable Co.
- 2040 - Saudi Ceramic Co.
- 2180 - Filing and Packing Materials Manufacturing Co.
- 2090 - National Gypsum Co.
- 2220 - National Metal Manufacturing and Casting Co.
- 2200 - Arabian Pipes Co.
- 2130 - Saudi Industrial Development Co.
- 2240 - Zamil Industrial Investment Co.
- 1301 - United Wire Factories Co.
- 2300 - Saudi Paper Manufacturing Co.
- 2320 - Al-Babtain Power and Telecommunication Co.
- 2340 - ARTEX Industrial Investment Co.
- 2370 - Middle East Specialized Cables Co.
- 1210 - Basic Chemical Industries Co.
- 2360 - Saudi Vitrified Clay Pipes Co.
- 1213 - Naseej International Trading Co.
- 1320 - Saudi Steel Pipe Co.
- 1303 - Electrical Industries Co.
- 1302 - Bawan Co.
- 1201 - Takween Advanced Industries Co.
- 1304 - Al Yamamah Steel Industries Co.
- 4142 - Riyadh Cables Group Co.
- 1202 - Middle East Paper Co.
- 4141 - Al-Omran Industrial Trading Co.
- 3007 - Zahrat Al Waha for Trading Co.
- 3008 - Al Kathiri Holding Co.
- 1323 - United Carton Industries Co.
- 1321 - East Pipes Integrated Company for Industry
- 4143 - Al Taiseer Group Talco Industrial Co.
Mining and Metals
- 1322 - Almasane Alkobra Mining Co.
- 1211 - Saudi Arabian Mining Co.
Real Estate
- 4324 - Banan Real Estate Co.
- 4325 - Umm Al Qura for Development and Construction Co.
- 4320 - Alandalus Property Co.
- 4321 - Arabian Centres Co.
- 4322 - Retal Urban Development Co.
- 4323 - Sumou Real Estate Co.
- 4220 - Emaar The Economic City
- 4230 - Red Sea International Co.
- 4300 - Dar Alarkan Real Estate Development Co.
- 4250 - Jabal Omar Development Co.
- 4310 - Knowledge Economic City
- 4020 - Saudi Real Estate Co.
- 4100 - Makkah Construction and Development Co.
- 4150 - Arriyadh Development Co.
- 4090 - Taiba Investments Co.
Transportation
- 4260 - United International Transportation Co.
- 2190 - Sustained Infrastructure Holding Co.
- 4030 - National Shipping Company of Saudi Arabia
- 4110 - Batic Investments and Logistics Co.
- 4040 - Saudi Public Transport Co.
- 4263 - SAL Saudi Logistics Services Co.
- 4261 - Theeb Rent a Car Co.
- 4264 - Flynas Co.
- 4262 - Lumi Rental Co.
- 4031 - Saudi Ground Services Co.
Media
- 4210 - Saudi Research and Media Group
- 4071 - Arabian Contracting Services Co.
- 4270 - Saudi Printing and Packaging Co.
- 4070 - Tihama Advertising and Public Relations Co.
Hotels and Tourism
- 1820 - BAAN Holding Group Co.
- 1810 - Seera Group Holding
- 4170 - Tourism Enterprise Co.
Information Technology
- 7200 - Al Moammar Information Systems Co.
- 8313 - Rasan Information Technology Co.
- 7201 - Arab Sea Information System Co.
- 7204 - Perfect Presentation for Commercial Services Co.
- 7203 - Elm Co.
- 7202 - Arabian Internet and Communications Services Co.
Business Services
- 1831 - Maharah Human Resources Co.
- 1833 - Al Mawarid Manpower Co.
- 1834 - Saudi Manpower Solutions Co.
- 1835 - Tamkeen Human Resource Co.
9. Conclusion
Halal stocks provide Muslim investors with an opportunity to participate in the stock market while adhering to their religious beliefs. By following strict screening criteria and focusing on ethical investments, halal stocks offer a viable and growing segment of the global financial market.
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