Even screened funds hold companies that have some residual non-compliant income. A halal ETF might hold a technology company that earns 2% of its revenue from interest. That 2% is not ideal.
Purification is the practice of donating the portion of your returns that corresponds to this residual income. The amount is always very small — usually 0.5% to 2% of your annual return.
Yusuf holds £10,000 in ISWD for a year. His return is 12%, so he has earned £1,200. ISWD publishes a purification rate of 1.3% of income. Yusuf's purification amount is £1,200 × 1.3% = £15.60. He donates that to a charity of his choice. Done.
- Wahed Invest: calculates and displays purification amounts automatically in your account
- ISWD: iShares publishes an annual purification ratio on their fund page
- Zoya Finance: calculates per-stock purification if you hold individual shares
Scholars generally describe purification as recommended (mandub) rather than obligatory (wajib) for ETF investors, because you did not knowingly earn the non-compliant income — you simply held a diversified fund. But the practice is widely followed as a precautionary measure. It costs very little and provides peace of mind.
Purification is separate from zakat. Zakat is a wealth obligation calculated on your total zakatable assets. Purification is specific to residual non-compliant investment income.