A Critical Review of the Thresholds of Sharia Screening for Stocks

Capital markets represent the second main application area of Islamic finance after banking sector. The most important instrument traded in these is stocks. character companies on legitimacy (shariah compliance) investing fact that with a completely Shariah compliant structure are few number brings about mixed carry out non-compliant activities even though their activity legitimate. Depending this necessity, allowed to financial do not comply principles certain extent. In context, thresholds used within scope screening determine level elements company. There two different approaches determining thresholds; minority-majority-centered approach and necessity-centered approach. first uses Shar'i evidence showing less or more borderline when setting for all analysis screening. approach, other hand, focuses amount necessity based market data. Both methods contain methodological problems threshold determination processes. This study aims reveal both propose sectoral method as an alternative.