Hijra to Sharia Investment: Getting to Know Islamic Stock and Its Criteria

Sharia or Islamic stock is basically stock that does not contradict sharia principles in the capital market. There are two types of Islamic stocks recognized in the Indonesian capital market:

1. The stocks that meet the criteria of Islamic stock selection.

2. The stocks that listed as Islamic stock by Islamic issuers or public companies.

All Islamic stocks, whether listed on IDX or not, are included into the List of Sharia Securities (DES) which is evaluated by the OJK on a regular basis.

Image Source: Freepik

So, What are the Criteria for Islamic Stock?

The issuer does NOT conduct any business activities as:

• Gambling and games considered as gambling.

• Trading that is not followed by delivery or transfer of products and/or services.

• Trading with a fake offer or demand.

• Ribawi financial services (interest-based bank and finance company)

• Buying and selling of risks that involve speculation (gharar) and gambling (maisir), e.g. conventional insurance.

• Producing, distributing, trading, and/or providing products or services that are haram in substance or haram not in substance as well as products or services that damage morals (mudarat).

• Conduct transactions that contain elements of bribery (risywah).

Also, the issuer must meet financial ratios:

• The ratio of interest-based liabilities (debt) to total assets is not more than 45%.

• The ratio of interest income and other non-halal income to total revenue is not more than 10%.

Sharia Thematic Index

The IDX currently has three sharia-themed stock indices:

1. ISSI (Indonesia Sharia Stock Index): An index that measures the price performance of all stocks on the Main Board and Development Board that are declared as Islamic stocks (included in the List of Sharia Securities).

2. JII70 (Jakarta Islamic Index 70): An index that measures the price performance of 70 Islamic stocks that have good financial performance and high transaction liquidity.

3. JII (Jakarta Islamic Index): An index that measures the price performance of 30 Islamic stocks that have good financial performance and high transaction liquidity.

Other Sharia or Islamic Products

Apart from Islamic stocks, there are several other Islamic capital market products such as:

1. Sukuk (Islamic Bonds)

2. Islamic Mutual Funds

3. Islamic Exchange Traded Fund (ETF)

4. Islamic Asset Backed Security

5. Islamic Real Estate Investment Trust

   
   

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Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).