If you’re building a halal investment portfolio and looking for passive income, you’ve likely run into a common problem: most halal ETFs don't offer high dividend yields. This is by design. Shariah screening removes many traditional high-yield sectors that rely on interest or carry excessive debt.
Inshallah the AAOIFI will discard their simplistic debt screener for something better that balances the reality of our world (like the compromise allowing a little bit of riba income) and isn’t as simplistic as market cap which isn’t a value anchored to reality.
One day every standard that is x dividend by market cap will be replaced with something better.
This thread fails to capture the test for a Muslim.
“By design” is Allah’s design. He can give to whomsoever He wills and withhold from whoever He wills.
If you go to the Haraam, it is easy pleasure short-term but loss in long term.
The whole “design” and test of life includes moments of sabr. Investing is also one of them. Allah wants us to totally rely on Him and not forget Him even during investing and work.
And Allah knows best.
I really hope it doesn’t. Allah forbid Riba for a reason. Making it halal in small amounts is kufr. This life is a test for the next.
The next life is permanent and everlasting and this life is only temporary
You fail to understand what my issue is. Market Cap is not a real number. It can change dramatically based on expectations which may or may not materialize.
Using market cap in this manner makes it difficult to use halal strategies like value investing which require a company’s assets to be undervalued compared to their fair market value. So a company may appear non compliant due to having “too much” debt compared to its inaccurate market cap.
Another issue, is this blanket approach does not take industry realities into consideration. Since the 90s Shariah councils in OECD nations have stated conventional mortgages are permissible because of the lack of alternatives that exist for muslims and because of the oppression that will occur if Muslims do not acquire property.
Utility companies are in a similar situation. their industry requires massive amounts of money for infrastructure to generate their service and they have no alternative aside from conventional debt. Sukuk in America doesn’t exist at the necessary scale and even then some sukuk is still just Riba wrapped in arabic jargon.
One example of the AAOIFI making good changes is their hoarding rule. 10 years ago if a company’s cash equaled 10% or more of their market cap they were considered hoarding and investing was Haram which made AAPL Haram as an example.
Thankfully many people pointed out how stupid this rule was due to a number of reasons and that specific rule was discarded.
I think debt as a percentage of total assets, or as a percentage of revenue or better interest expense as a percentage of assets or revenue would be a better measurement because its not haram to take out a loan, its haram to pay and charge interest. So the issue isnt that a company takes out a $1 billion loan. the issue is the interest they have to pay on that loan. The current rules ignore this all together.