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Shariah Compliant Stocks in Pakistan?
Shariah Guidelines for Trading and Investment in Stocks
September 24, 2021
Shariah Compliant Stocks in Pakistan? Source: blog.islamicly.com
List of Pakistani Shariah Compliant Stocks and Firms Listed on the Pakistan Stock Exchange
Are you in Pakistan or a Pakistani National interested in Halal investing?
If Yes, then this blog is for you.
This blog will equip you on how to find Shariah compliant stocks instantly and keep your investments compliant with Shariah at all times.
You must be aware that Shariah Compliant stocks and Shariah based investments in Pakistan are quite popular as most of the natives want their investments to be in line with Shariah Principles.
Although there are quite a few Shariah Compliant investment options in Pakistan, but there aren’t many technology tools for their discovery.
If you are looking for a technology solution to keep your stock market investments in accordance with Shariah principles, then read this blog till the end. You will get to know a unique, comprehensive but simple way of finding well researched Shariah Compliance information of stocks in real time.
Reading this blog will advance you a step and would enable you to find a list of Shariah Compliant stocks even though you may be a beginner at this.
Let's get Started
Trading in shares and stocks is permissible in Islam with conditions that the companies to be traded in must not be involved in any prohibited business activities pertaining to alcohol, financial services, gambling, Pork, pornography, tobacco, Non-Permissible Advertising, Prohibited Media and Entertainment.
Stocks that are not involved in these activities or derive less than 5% income from such prohibited activities are said to have passed the first level of Shariah screening i.e. business activity screening.
Such companies also need to pass another filter for their financial ratios as well.
Companies that pass both the filters, i.e. business sector screening as well as financial ratio screening are said to have passed the Shariah screening and are permissible for investment by Shariah sensitive investors.
To know about the Shariah screening criteria for listed equites, please see this link Shariah Screening Criteria
You also need to know what the dividend purification ratio is for every Shariah compliant stock. You have nothing to worry about, we have written a detailed blog on this. Just check Purification of Shariah Compliant Equities
Shariah Compliant stocks in Pakistan
We have thoroughly studied the companies listed on Pakistan Stock Exchange and screened them as per the Shariah screening criteria mentioned above.
We found that only 27% stocks listed on PSX are Shariah Compliant i.e. they pass the sector checks as well as financial ratios. See the pie below.
Popular Shariah Compliant Stocks in Pakistan
Based on market capitalization, the top 10 companies listed on Pakistan Stock Exchange are listed below along with their Shariah compliance status. The below results aren’t very encouraging since only 2 stocks amongst the top 10 are Shariah compliant. Many of them as you can see pass the sector checks but they fail the financial ratios, thus they have been marked as Shariah Not Compliant.
5 years compliance history.
We have performed an analysis on Pakistani stocks to know the 5 years compliance history. Let us see the history of how many stocks are Shariah compliant in the past 5 years.
As per the above graph, the compliance history is almost stable. This indicates the market in Pakistan for Shariah compliant stocks is stable and that minimizes the Shariah compliance risk.
Shariah Compliant Stocks – Sector Wise
Let us see how many stocks in each sector are Shariah compliant in Pakistan.
Pakistan Stock Exchange
There were three stock exchanges in Pakistan earlier.
1. Karachi Stock Exchange (KSE)
2. Islamabad Stock Exchange (ISL)
3. Lahore Stock Exchange (LSE)
These three stock exchanges merged into one and they were named as Pakistan Stock Exchange. This step was taken on 11th Jan 2016 to mobilize the economy and strengthen the Pakistani capital market. The merger of these three exchanges was aimed at enhancing the efficiency of the capital market and technologically boosting the capital market by creating more confidence among investors and listed companies.
Pakistan Stock Exchange is now governed and regulated by Securities Exchange Commission of Pakistan
The performance of the exchange post-merger saw an overall steady rise in the stock market indices and attracted foreign investments. PSX started playing a very vital role to drive Pakistan’s economy ahead by creating strategic partnerships, reducing cost of operations and giving more space to investors to grow their wealth many fold.
Shariah Perspective of Pakistan Stock Exchange
Shariah Compliant financial instruments are an important component and integral part of the Pakistani Capital Market. In 1980, Pakistani companies came up with the first Islamic business model that is Mudarabah which is known as a partnership or a business venture where a contract is signed between two parties. One party will bring capital and the other party will put its effort to run the business and the profits earned or loss incurred will be shared mutually as agreed between them.
Shariah Compliant REITS, Shariah Compliant Equity and Mutual Funds, Shariah Compliant Income funds and Non-Banking Financial Services made their home here, performed well and distributed good returns to their investors.
Banking products in line with Shariah Principles see a huge demand in the country and those demands are being met majorly by the below Islamic Banks in Pakistan.
1 Bank Islami
2 Islamic commercial bank (Al Baraka)
3 Dubai Islamic Bank Pakistan Limited
4 Meezan Bank
5 Bank Alfalah Limited - Pakistan
6 The Islamic Development Bank - Pakistan
7 Burj Bank
Meezan Bank is believed to be the largest Islamic bank in Pakistan and it caters to various Islamic banking needs for individuals as well as for businesses.
Shariah Finance Scholars in Pakistan
If we talk about Islamic Capital Market in Pakistan, no discussion is complete without talking about a renowned Pakistani Shariah Scholar who is considered a pioneer in Islamic Finance Industry across the globe. Mufti Muhammad Taqi Usmani, who hails from Pakistan, is a key Scholar and a pioneer of the Islamic finance Industry. He has chaired the Shariah Board of the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). His work in the Islamic Financial services industry will remain priceless. May Allah give him the best reward and a long life as the industry requires more guidance from him.
Pakistan is known as the Islamic Republic of Pakistan and it was created during the partition of India with its capital in Islamabad. This is a great country housing 207.58 million Muslims out of a total population of 216.23 million. The Muslim population in the country is around 96% which is the second largest Muslim populated country in the world after Indonesia. The state religion Islam.
How Islamicly App can help you
Islamicly App is a simple to use mobile tool to check the Shariah compliance of stocks listed in Pakistan as well as around the world.
Islamicly App is a unique app in its style across the world and provides the most accurate and well researched Shariah information on equities listed on stock exchanges globally. Do check it out yourself, just download it and start using Islamicly.
The world of Shariah compliant stocks brought to your fingertips! You can do various activities on the app like search for Shariah compliant stocks, add them to your portfolio, see their purification, get alerted if they change compliance and much more.
Here is the link to download Islamicly App
Keep Investing Islamicly!
Do watch what one of the pioneering scholar of Islamic finance says about Islamicly here:
VIA: GOOGLE WORDPRESSISLAMIC
TAG: SHARIAH COMPLIANCE STOCK RESEARCH
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