Halal screening is a two-stage process. First, it checks what a company does. Second, it checks how its finances are structured. A company must pass both tests.
Stage 1: Industry screen
- Alcohol production and distribution
- Gambling and casinos
- Conventional banking and insurance
- Weapons and defence
- Pork products
- Tobacco
- Adult entertainment
Any company deriving more than 5% of revenue from these activities fails the industry screen.
Stage 2: Financial ratios
- Debt-to-market cap must be below 33% (avoids excessive interest-bearing debt)
- Interest income must be below 5% of total revenue (avoids riba-adjacent income)
- Accounts receivable and cash must be below 33% of total assets
A real example
Apple Inc. passes both screens. It is in technology, not a prohibited industry. Its debt-to-market-cap ratio is well below 33%, and its interest income is minimal relative to its enormous product revenue. Barclays fails immediately: its entire business model is based on interest.