In a previous post, I discussed mixed shares and how the majority of Shariah Compliant shares on offer to investors would tend to fall under this category. I also gave a very simple example of how screening for Shariah Compliant shares is done. You can refer back to this post for a recap on mixed shares/screening (Investing In The Shares Of Listed Companies (Shariah Compliant Shares) (#2) | RIZQONOMICS) and this post to learn more about different types of shares (Investing In The Shares Of Listed Companies (Shariah Compliant Shares) (#1) | RIZQONOMICS).
In reality, as anyone who has conducted screening before knows, the process can be quite tedious and not everyone would be able to do it by themselves especially if they don’t have experience of going through the financial statements of companies and if they don’t have a Shariah Advisor to refer to regarding the Shariah issues that usually crop up. Furthermore, if you need more information from a particular company regarding their financial statements, they are more likely to respond to companies as opposed to individuals. This is where companies providing a Islamic share screening service come into the picture.
There are certain companies which focus on providing these services to financial institutions whereas there are others which are more focused towards retail investors. As I am frequently contacted by individuals asking about the status of a specific share, for this particular post, I will write about a service geared towards retail investors called Zoya.
Background
Zoya is a Islamic fintech firm that was launched in 2019 and is based out of the USA. This mobile application seems to be quite popular amongst Muslim investors and I have been hearing about it for quite some time. The application is available to download for both Android and Apple devices.
The sign up process is straightforward, you just need to download the application to your mobile phone and then sign up using your email address. Once you have signed up, you can easily search for the Shariah Compliance status of a company by using its name or symbol. Currently, Zoya mentions that they cover over 8000 stocks focusing on the US, UK and Canadian Markets although they expect the number of international markets to expand soon.
The basic version of the application is free, however you will only be provided with limited information i.e. the Shariah Compliance status of a share without the full Shariah Compliance Report which breaks down the details which you would need for a more informed investment decision and to know the financial figures that you would need to conduct the required purification exercise.
If you upgrade to the Pro version, you will get access to more detailed research and full Shariah Compliance Reports as well as receive alerts if the status of shares in your watchlist change for any reason. A user can opt to pay for a month, 6 months or 12 months, saving money if they opt to pay for a longer period upfront. Their prices are reasonable working out to around $10 a month if you opt for 12 months upfront. They also offer discount to students.
The company offers a 7 day free trial for those who would like to test out the application.
Screening Methodology
Zoya uses the AAOIFI Shariah Standards as the basis to screen shares for Shariah Compliance. We discussed AAOIFI’s methodology for share screening in the previous post on mixed shares. The company may support other screening methodologies in future.
Shariah Compliance Reports
For the individual to check whether a share is Shariah Compliant they first need to search for the company and then they can check the company’s full Shariah Compliance Report (paid users). The report details the Shariah Compliance status of the share in question and the user can check details of the Business Activity Screen (ratio) as well as details of the two Financial Screens (ratios).
The Shariah Compliance Reports have something unique which I haven’t come across before in other offerings, where they mention if a company has some questionable revenue which means that the revenue falls into a grey area where there maybe a difference of opinion amongst contemporary Shariah Scholars or where they were unable to get enough information to determine whether the revenue in question is Shariah Compliant or not.
The company updates their Shariah Compliance Reports (including Market Cap) every time a company reports there earnings, this in most scenarios would be on a quarterly basis.
Purification and Exit
As mentioned previously, the Shariah Scholars that allow investments in mixed shares still require purification of any non-Shariah Compliant income. From experience, the exit and purification process can be confusing for investors and it is something where there tends to be a lot of queries. Zoya has aimed to address this by detailing in their FAQs, how shares should be exited or purified according to them. While this is good, an actual example of the purification exercise for the shares of an actual company might have been better. However, Zoya does plan to make this process easier in future possibly through automation.
Shariah Advisor
Screening is not an exact science and can be subjective. It is important for a company offering such services to have access to a Shariah Advisor(s). Zoya is supervised by Sheikh Joe Bradford, based in America, who has experience in the field.
Conclusion
Zoya is an affordable offering for those who invest in mixed shares and is easy to use. As and when the application is updated with new features, I will update the post inshaAllah.
Before choosing to invest, you should consult with a Shariah Advisor.
