THE PAST, PRESENT, AND FUTURE OF SHARĪʿAH COMPLIANT EQUITIES: EVOLUTION, CURRENT PRACTICES, AND FUTURE DIRECTIONS

Purpose — This study presents a comprehensive analysis of Sharīʿah-compliant equities, tracing their historical evolution, assessing current practices, and exploring ongoing challenges and future directions. It focuses on conceptual foundations, screening methodologies, and evolving compliance standards across global markets.

Design/Methodology/Approach — This conceptual, policy-oriented paper is based on an archival review of fatwas, Sharīʿah standards, academic literature, and market practices. It synthesises regulatory resolutions (e.g., Al Rajhi Bank fatwas), international screening frameworks (e.g., AAOIFI, Dow Jones, FTSE), and peerreviewed studies. From an initial pool of over 100 sources, 58 were selected based on relevance and recency.

Findings — Sharīʿah-compliant equities have witnessed significant expansion and transformation. Nonetheless, major challenges remain, including inconsistent screening criteria, regulatory fragmentation, and complexities in purification and zakat practices. Emerging trends—such as ESG integration and fintech-driven compliance tools—offer both opportunities and hurdles for reform.

Originality/Value — This paper offers a distinctive, policy-driven framework connecting historical development with future reform, advocating a shift from Sharīʿah-compliant to Sharīʿah-based equity models through convergence, stronger governance, and greater transparency.

Research Limitations/Implications — The study uses qualitative analysis and secondary data. Future research could incorporate empirical methods and crossjurisdictional regulatory comparisons to test and extend the findings.

Practical Implications — The study informs investors, academics, and regulators about the need for harmonised compliance standards and improved disclosure practices within Islamic equity markets.

Social Implications — Sharīʿah-compliant equities support ethical and socially responsible investing by aligning financial decisions with Islamic moral and legal principles.