Islamic Indexes Intro

The MSCI Islamic Index Series follow Sharia investment principles. An Islamic Index is based on an MSCI Equity Index but excludes all the non-compliant securities in accordance with the MSCI Islamic Index Series Methodology.

The Islamic Indexes excludes non-Sharia-compliant securities through business activity screening and financial ratio screening. There are two index variations that implement similar business screening criteria while using distinct approaches in terms of financial screening as far as ratio calculation is concerned. The MSCI Islamic Index Series uses Total Assets as the denominator while the MSCI Islamic M-Series Index uses Average Market Capitalization as the denominator. The Islamic Index Methodology has been approved by MSCI’s Sharia advisors’ committee of Sharia scholars, as Sharia compliant.

What are Islamic Indexes?

Following Shari'a investment principles, MSCI excludes securities from the indexes using two types of criteria: business activity and financial ratios.

Index Variations

 

MSCI Islamic Index Series

Uses Total Assets as the denominator

 

MSCI Islamic M Series Index

Uses Average Market Capitalization as the denominator

Islamic Indexes Creation Methodology

Business Activity Screening

  • Alcohol
  • Adult Entertainment
  • Cinema
  • Conventional Financial Services1
  • Defense / Weapons
  • Gambling / Casino
  • Hotels
  • Music
  • Online Dating2
  • Pork related products
  • Tobacco

Financial Ratio Screening

A Series use Total Assets as denominator
M Series use Average Market Capitalization as denominator

Financial ratios may not exceed the thresholds stipulated.

A security that is not a constituent will be considered compliant with respect to financial screening only if all three financial ratios do not exceed the thresholds.

Islamic Index Series

Total debt over total asset
33.33% 30.00%

Sum of cash and interest-bearing securities over total assets
33.33% 30.00%

Sum of accounts receivables and cash over total assets
33.33% 30.00%

Islamic Index M Series

Total debt over average issuer market capitalization
33.33% 30.00%

Sum of cash and interest-bearing securities over average issuer market capitalization
33.33% 30.00%

Sum of accounts receivables and cash over average issuer market cap
49.00% 46.00%

Dividend Purification

(Total Earnings – (Income from prohibited activities + Interest income)) / Total Earnings

 

Why Islamic Indexes?


Why Islamic Indexes

Follows Shari’a Investment Principles

  • The MSCI Islamic Index methodology was reviewed and approved as Shari’a compliant by an independent Shari’a advisory committee of Islamic scholars
  • Identifies Shari'a-compliant debt and instruments when calculating ratios
  • Periodic reviews of indexes by Shari’a Advisory Board

Rigorous Methodology, Customization Capabilities

  • Designed using input from thorough client consultations
  • MSCI was one of the first index providers to incorporate dividend purification in the total return calculation of its indexes
  • Buffer rules used in the financial ratio screening aims to minimize turnover
  • Indexes can be customized to client preferences, including screens, ESG, Climate and Factors

Breadth, Depth and Liquidity

  • Market-leading brand with over 40 years expertise in calculating indexes
  • Consistent methodology across countries and regions
  • Leverages Islamic screens and research from MSCI ESG Research 3

How clients can use Islamic Indexes?

How clients can use Islamic Indexes?

  • As benchmarks for investors and their investment managers; the indexes also are used as the basis for structured products and index-linked investment vehicles, such as ETFs and ETNs
  • Help investors better evaluate, select, and monitor managers and their performance
  • Conduct research on asset allocation needs
  • Assist in the construction of passive and active portfolios 
  • Serve as the basis for investment vehicles that are designed to gain or manage the exposure to different segments of the global equity markets 
  • Customize MSCI Islamic Indexes 
    • MSCI offers a wide range of customization of index capabilities to help investors integrate Islamic indexes in their investment process in a way that is aligned with their specific objectives.
    • Islamic index features also can be combined with ESG and Climate, Factors or any other MSCI data set

The MSCI China Tech Index offerings Duplicate 2

Islamic Indexes Offerings

 

MSCI ACWI Islamic Index

 

MSCI ACWI Islamic M-Series Index

 

MSCI World Islamic Index

 

MSCI World Islamic M-Series Index

 

MSCI Emerging Markets Islamic Index

 

MSCI Emerging Markets Islamic M-Series Index

The MSCI Islamic A-series Index, launched in 2007, uses Total Assets as the denominator. To further accommodate investor preferences, the MSCI Islamic M-series Index, introduced in 2015, uses Average Market Capitalization as the denominator.

Related cards

Islamic Indexes footnotes

 

1Conventional Financial Services: Commercial banks involved in retail banking, corporate lending, investment banking; companies involved in mortgage and mortgage related services; providers of financial services, including insurance, capital markets and specialized finance; credit agencies; stock exchanges; specialty boutiques; consumer finance services, including personal credit, credit cards, lease financing, travel-related money services and pawn shops; financial institutions primarily engaged in investment management, related custody and securities fee-based services; companies operating mutual funds, closed-end funds and unit investment trusts and insurance and reinsurance brokerage firms, including companies providing property, casualty, life disability, indemnity or supplemental health insurance.

2MSCI ESG Ratings, research and data are produced by MSCI ESG Research LLC, a subsidiary of MSCI Inc. MSCI ESG Indexes, Analytics and Real Estate are products of MSCI Inc. that utilize information from MSCI ESG Research LLC. MSCI Indexes are administered by MSCI Limited (UK).

3Starting from the November 2021 Semi-Annual Index Review, online dating services are considered as part of the prohibited activities. Matrimonial services are not considered as part of this screen.