Salam Alaikum
I have a question regarding how the AAOIFI standards apply to small-cap companies or startups. Let’s say we have a start-up company that’s not yet in the profitability stage. By default, such companies will have an overwhelming amount of interest in their balance sheet. Not because they love interest per se but simply because they need to establish credibility in the market and perhaps encourage other investors to invest in the company.
What would be the case then? Is there a statement from the AAOIFI regarding such cases? Unfortunately, many mega-companies have some problematic ties with Israel and its military activities so small-cap companies might be a better alternative.
Also, since compliance reports are based on quarter reports, the issue is that the interest ratio changes with market fluctuations. I mean, the company management’s policy regarding interest might not have changed. However, the interest ratio increased due to market circumstances, as the company is facing some economic hardships, for example.
How would that affect the permissibility of being a shareholder of that company?
Also, being a shareholder and its permissibility should be based on ‘future\prospective’ expectations, NOT just the past quarter. The quarter reports tell the story of what happened in the past quarter, and they’re in no way an indicator of management’s behavior toward non-halal income.
Do the AAOIFI standards account for this, and perhaps there is another way to identify the compliance of the company that’s more robust to incidental market fluctuations?
Thanks