Standardization of Islamic market indices

Purpose – The purpose of this paper is to bring the attention of Muslim world toward uniformity of Shariah principles. The paper also presents different opinions of experts toward standardization. Selection criteria of four different Islamic market indices are compared. Some points like Halal business and debt ratio are common, while others are different. Design/methodology/approach – The qualitative research method has been used in this research work and various types of documents and research articles were analyzed. The authors analyzed the data of four Islamic stock markets in the world. First, they write all the screening criteria of every Islamic stock market for selecting a company for their stock market. Afterwards, they make a table that presents the comparison of screening criteria of all Islamic market indices. Findings – A Shariah Board of Islamic Market approves any company as being Islamic Shariah-compliant based on certain criteria. Different Islamic market indices use their own criteria for selecting the company. Every Islamic market index has its own rules and regulations of the Shariah Board. Sometimes these rules are contradictory with each other; for example, if KMI-30 Islamic index is not selecting one particular company due to higher debt ratio but Dow Jones Islamic market index selects that company because that company meets the criteria of the Dow Jones Islamic market index. Research limitations/implications – The main limitation is that there is no approach to regulators of the different Islamic market indices around the globe. Practical implications – If Islamic indices work on the suggestions provided in this paper, standardized criteria will be available to all indices and, consequently, confidence of the investors and operational issues will be resolved. Investment will be increased. Social implications – The belief of non-Muslims will be strong that Islamic laws are the same any where. A shift from conventional finance to Islamic Finance will be sped up. Originality/value – This research work is original and first attempt on the topic of standardization of screening criteria of Islamic stock markets around the globe.