Halal Investment: Shariah Compliant Stocks in United Kingdom Source: blog.islamicly.com
United Kingdom is a center of Shariah Compliant Products and Islamic Finance for the Western World.
Many users of Islamicly App from UK have requested us to write a comprehensive blog that would elaborate how to find Shariah compliant equities in United Kingdom.
We accepted Islamicly Users’ request and bring you this comprehensive blog today that would examine Shariah investing and many aspects of Halal Investments happening in UK.
Retail Investors who wish their investments to be Shariah compliant, face various issues and are usually clueless about how to get a list of stocks complying with Islamic principles.
No worries! In this blog we are going to disclose from where and how you can get such a list of Shariah compliant stocks in England in a hassle free manner. We hope this article will address all your concerns of Shariah compliant investing in Shariah equities on London Stock Exchange (LSE).
Investing in equities is considered a Shariah compliant activity by Islamic scholars. You can read more about this in our blog Is it halal for Muslims to Invest in Shares listed on Stock Markets?
Shariah investment guidelines do not allow Muslim and Islamic investors to trade in shares and stocks of companies which are involved in such businesses and earn more than 5% of their income from prohibited business activities like selling Alcohol, Tobacco, Pork products, gambling, pornography, interest based financial services, Un-Islamic advertising, Media and Entertainment which is opposed to Islamic principles as well as trading in gold and silver on a deferred basis.
Once you identify such stocks that do not cross the 5% non-permissible income limits as mentioned above, you need to see whether these companies also pass the Shariah Financial Screening threshold as mentioned below:
i- Cash Compliance Ratio
(Cash + Interest Bearing Securities) / Market value of Equity (36 month average) < 33%
ii- Receivable Compliance Ratio
Accounts Receivables / Market value of Equity (36 month average) < 49 %
iii- Debt Compliance Ratio
Debt / Market Value of Equity (36 month average) < 33 %
If yes, then you are good to go and invest in that company.
Are you worried that how could you perform such complicated analysis and filter Shariah screened stocks for your investments?
Furthermore, how do you monitor the Shariah compliance status of your investments on an ongoing basis as Shariah compliance of stocks is dynamic and not static?
We understand your concerns and would love to inform you that you really do not need to undergo this painful and complicated exercise. We have already done this for you!
Just read this blog till the end and decode the secret to investing in Shariah compliant equities in Britain with ease.
Shariah Compliant stocks in United Kingdom
As mentioned earlier, stocks are considered to be Shariah compliant if they pass the business sector check as well as the financial accounting ratios. Only such stocks are permissible for investments as per the Shariah guidelines.
Please have a look at the detailed guidelines on what is Shariah Screening?
Have you ever thought, how many stocks would be Halal for investment in the United Kingdom?
The result we are going to display here will surprise you as a whopping 40% of stocks on the UK capital markets are Shariah compliant!
Yes, you read that correct! There are about 300+ stocks which are Shariah Compliant in the UK. Just have a look at the below pie chart.
Screenshot taken from Islamicly Web Portal as on 7th october 2020
Being a Shariah sensitive investor, 300+ Shariah compliant equities from a developed market, should give you a decent pool of stock options for you to trade in. The number of Shariah compliant stocks listed on London Stock exchange are estimated to be on rise in the near future too.
Top 5 Shariah compliant stocks by Market Capitalization on London Stock Exchange.
Sector wise Shariah Compliant stocks in United Kingdom This is worth mentioning that we have conducted a comprehensive research on stocks associated with different sector and the below are amazing results for sector wise Shariah compliant stocks in UK.
|BHP||BHP Group PLC||Basic Materials|
|RIO||Rio Tinto plc||Basic Materials|
|Sector||% of Compliant Stocks||% of Not Compliant Stocks|
|Real Estate & Construction||29%||71%|
|Food & Beverages||24%||76%|
The Consumer goods sector followed by the healthcare sector are the two largest sectors to have Shariah compliant stocks in the United Kingdom Market. The demand for investments in healthcare companies during Covid-19 is rising and is good news for Islamic investors as it has a good number of Shariah Compliant stocks to invest in.
5 Years History of Shariah Screened Stocks in UK
Let us see the movement of stocks in terms of Shariah compliance during the last 5 years and what it means for the Islamic investors.
As you can observe from the above chart, there is very minimal fluctuation in the percentage of Shariah compliant stocks in the past 5 years. It shows that Shariah compliance risk is very minimal which is again a positive feature for Islamic Investors in the UK.
Capital Market in London
London Stock Exchange is a very popular stock exchange in the world as well as the leading capital market in Europe.
The LSE has a long history going back to the Royal Exchange connecting its dots to the coffee houses.
The London Stock Exchange is very prestigious and the oldest stock exchange in the world with modern trading infrastructure where everything is digitized and automated.
This stock exchange is also very famous for supplying high-quality prices, news and other information to the financial groups, not only in the UK but across the globe.
London Stock Exchange and Islamic Financial products
LSE is a leading exchange in the west having various Islamic products listed. It has Sukuks, Exchange Traded Funds (ETFs), FTSE Shariah Global Index, Russel Global Indices.
LSE encourages Shariah sensitive investors to invest and fund Shariah Compliant Instruments. In addition, it favors and promotes Islamic financial instruments to grow in the region. This is the reason, London is known as a Hub of Islamic Finance.
Islamic Banks in UK
As the capital market in UK is Shariah friendly and allows Islamic Banking, there are various Banks operating as Full Fledged Islamic Banks in the UK. A few of them are numerated below:
List of Islamic Banks operating in United Kingdom
1- Islamic Bank of Britain
2- Qatar Islamic Bank – QIB UK
3- European Islamic Investment Bank (EIIB)0
4- Halal Mortgages
About United Kingdom
United Kingdom is a great and beautiful country that has 68 million residents of which about 3 million are Muslims. The country is honored with around 2000 mosques and one of the biggest mosques is Baitul Futuh Mosque. The London Central Mosque is a prominent Islamic landmark in the UK. Islam is the second largest religion in the UK.
According to Wikipedia , London – the capital of UK is positioned as one of the world’s most powerful, most visited and most influential, most expensive, most investment friendly and most popular cities.
Screenshot taken from Islamicly Web Portal as on 7th october 2020
How can Islamicly help you in finding Shariah compliant stocks in UK?
In United Kingdom, retail Islamic investors had very minimal choices to access a list of Shariah Compliant stocks. There are a few firms providing such a service but they served only institutions not individuals. Being an individual investor, are you worried how to find whether your stocks are Shariah Compliant or not?
No worries now!!
Islamicly App UK based Shariah compliant investors well-researched, accurate and Shariah Scholars certified, information as to which stocks listed in the UK are Shariah compliant. What you need to do is just download the app on your smart phone and explore the Shariah status of stocks in the UK in a simple way. You can also enjoy the web version of Islamicly App to increase your comfort level on a big screen Isn’t it amazing?
Here is the link to download Islamicly App
Do watch what one of the pioneering scholar of Islamic finance says about Islamicly here: