A Brief Introduction to the
KMI-30 Index and Stock
Screening Process for
Shariah Compliance
By
Farhan-Ul-Haq Usmani
VP, Product
Development
& Shariah Compliance
(PDSC)
Product Development & Shariah Compliance
Meezan Bank Limited
Overview of KMI - 30
• Introduction
• Objective of Launch
• KMI – 30 Composition
• KMI – 30 Companies
Product Development & Shariah Compliance
Overview of KMI - 30
• Introduction
– KSE and Al-Meezan Investment Management
Limited launched its first co-branded Islamic Index
(KMI-30) on 1st of Ramadan 1429 HIJRA which
tracks thirty most liquid SHAIRAH compliant
stocks.
– Al Meezan Investments & Meezan Bank provide its
Shariah expertise, guidelines, skills and stocks
screening towards the activities with regard to
launching and continuation process of the Index. On
the contrary, KSE provides maintenance and
dissemination support for the index.
Product Development & Shariah Compliance
Overview of KMI - 30
• Objective of Launch
– To provide investors suitable benchmark for returns
on Shariah Compliant equity investments.
– To help shariah conscious people choose the
profitable stocks which are Shariah Compliant.
– To provide a relevant benchmark to Islamic equity
funds for comparing their performance.
Product Development & Shariah Compliance
Overview of KMI - 30
• KMI – 30 Index Composition
– KMI – 30 Index comprises of 30 Shariah Compliant
Companies.
– Shariah compliance is ensured through Stock Screening process
conducted by Al-Meezan Investment Management Limited and
counter checked by Islamic Financial Advisory division of
Meezan Bank Limited (www.islamicfinancialadvisory.com)
– Al Meezan Investments provide its Shariah expertise,
guidelines, skills and stocks screening towards the activities
with regard to launching and continuation process of the Index.
On the contrary, KSE provides maintenance and dissemination
support for the index.
Product Development & Shariah Compliance
KMI-30 Scrips
For Current KMI 30 Index Companies and Complete list of Shariah
Compliant Scrip at KSE, visit
www.meezanbank.com
www.almeezangroup.com
www.kse.com.pk
* The KMI 30 index re-composition takes place twice a year
** The Stock Screening Criteria followed by KMI 30 Index is approved by
the honorable Shariah Supervisory Board of Meezan Bank Ltd. and can be
changed as per the instructions of the Board without any notice.
Product Development & Shariah Compliance
Stock Screening criteria
• Criteria # 1: Business of the Investee Company
– The business of the investee company should be
Halal. Accordingly, investment in shares of
conventional banks, insurance companies,
leasing companies, companies dealing in alcohol
etc are not permissible.
Product Development & Shariah Compliance
Stock Screening criteria
• Criteria # 2: Interest Bearing Debt < 37% of
Total Assets
– Interest Bearing Debt includes Bonds, TFCs,
Conventional Bank Loans, Finance Lease,
Preference Shares etc.
– Total Interest bearing Debt must be less than
37% of the Total assets of the investee company.
Product Development & Shariah Compliance
Stock Screening criteria
• Criteria # 3: Non-Shariah Compliant Investments < 33%
of Total Assets
– Non-Shariah Compliant Investments include investments
in conventional mutual funds, conventional money
market instruments, Bonds, PIBs, FIB, CoIs, CoDs,
TFCs, DSCs, T-Bills, all Interest based placements and
interest based loans and advances etc.
– Non-Shariah Compliant investments must be less than
33% of Total Assets of the investee company.
Product Development & Shariah Compliance
Stock Screening criteria
• Criteria # 4: Non-Compliant Income < 5% of Total Revenue
– Non Compliant Income includes Bank Interest, Income from
gambling, nightclubs, prostitution, casino, tobacco, alcohol, dividend
income from above mentioned businesses, dividend income from
Shariah non-Compliant Companies etc.
– Capital Gain need not be purified.
– Non-Shariah Compliant income must be less than 5% of Total
Revenue of the investee company.
– Total Revenue includes Gross Sales + Other Operating Income.
– Dividend Purification is done by disbursing amount in Charity
calculated as per the Charity rate determined.
Product Development & Shariah Compliance
Stock Screening criteria
• Criteria # 5: Illiquid Assets/Total Assets > 0.25 or 25%
– Illiquid Assets include property, plant &
equipment, building, furniture & fixture,
Intangible Assets, Stock in trade, Stores and
spares and all similar assets.
– Illiquid Assets must be at least 25% of the total
assets of the Investee company.
Product Development & Shariah Compliance
Stock Screening criteria
• Criteria # 6: Market price/Share > Net Liquid
Assets/Share
– Net Liquid Assets Per share = Total Assets –
Illiquid Assets – Total Liabilities divided by
Number of Shares Outstanding of the Investee
Company.
– Market price per share should be greater than Net
Liquid assets per Share.
Product Development & Shariah Compliance
