Salaam all. Is anyone familiar with resources that can be used to screen index funds for shariah compliance? I work for the federal government and the employee retirement plan is managed by a firm that invests in three index funds that replicate the S&P 500, Dow Jones, and the MSCI EAFE Index.
FYI an index fund is normally, probably almost always, going to be non-compliant. Just because it is highly likely to have one stock that is not-compliant, which makes the whole fund not compliant.
As it stands there is nothing that screens an index. You’d have to go one by one on each stock. But S&P and Dow are I’m pretty sure not compliant for the reason stated above.
My best suggestion is to see if the firm has access to any of the list of sharia compliant funds. In the UK, it’s a legal requirement for companies to offer employees a sharia compliant option - not sure about US.
There’s no legal requirement to offer sharia compliant funds in the US. Unfortunately if anything companies and especially state/governmental institutions may face the opposite issue if they were inclined to provide such options, due to bigoted anti sharia politics.
The approach I followed is if a company provides free benefits, try to pick the least problematic investments to capture those benefits, and as soon as you find a better alternative that you can roll over funds into you should plan to do that. Be conservative and over estimate how much needs to purify of the dividends, and if one were to give away that and still come out ahead financially then go for it. InshaAllah by giving away more we can gain Allah’s forgiveness for our shortcomings and oversights, and retain blessings in our wealth.