The Transparent Shariah Process

Wahed believes a transparent Shariah-compliance process begins with the independence of Shariah advisors. Much like independent auditors who review company financial statements for accuracy (as opposed to relying on the company), Wahed partners with some of the most reputable Shariah Scholars to ensure an independent review and audit of both (1) the investments and portfolios we construct for our clients, and (2) the way the company operates. Below is a transparent overview of how the Shariah-compliance process actually works for each of these two areas.

Wahed’s Shariah Board:

Ensuring Client Portfolios are Shariah-Compliant:

Below is the current standing certificate regarding Wahed’s investment platform and operation from its independent Shariah board. : 


There are several considerations our investment team has to take into account when constructing Shariah-compliant portfolios. Firstly, we have to ensure that any securities or financial instruments are permissible; for example, we cannot use any derivatives or options contracts in any of our portfolios. When we narrow down the permissible securities, we arrive at equities (“stocks”), Sukuks, and physical assets such as commodities or real estate.

Secondly, we must ensure that the vehicles through which we access these potential investments are Shariah-compliant. We can buy stocks individually outright or instead invest in a mutual fund or exchange-traded fund (“ETF”) that hold equities collectively. As an overlay, any financial instruments or vehicles we opt to use in portfolios must be approved by our shariah board prior to their inclusion in our portfolios. These Shariah investment policies are foundational guidelines with respect to portfolio composition and have been in effect since our first client.

As an additional measure of compliance, virtually all of the securities in our portfolios are already Shariah-compliant or taken from Shariah-compliant indices. For example, the Wahed FTSE Shariah USA ETF is a passive ETF that replicates the FTSE USA Shariah Index, an index that is already certified as Shariah-compliant by FTSE Russell’s Shariah advisors. Other funds we incorporate into portfolios, such as iShares World Islamic ETF or the HSBC Global Islamic Fund, for example, are certified Shariah-compliant by the related fund managers’ Shariah advisor and then submitted again to Wahed’s Shariah board for approval for use in our client’s portfolios. 

Suffice to say that ensuring the permissibility of both the types of securities we include in portfolios, as well as the actual funds, is the key consideration for Wahed globally. In fact, it is our mission to provide our clients with peace of mind in knowing we are thorough and diligent in this regard to the point of redundancy.

Wahed ETFs:

All funds used in Wahed’s portfolios, either proprietary or third-party, are Shariah-compliant in structure and underlying holdings. Below, we have shared the certificates for Wahed’s proprietary funds, detailing their Shariah-compliance:

HLAL: link

UMMA: link

As discussed above, in addition to our funds existence, structure, and operation being Shariah-compliant, the underlying index being tracked is also separately certified. Here’s the certificate of the Indices we use:

HLAL: link

UMMA: link

The Purification Process:

Purification is calculated on the total dividends that an investment distributes over a designated period (generally for Wahed this is an annual period, though it may stretch across calendar years). For third party funds used on our platform, we receive purification calculations from the fund managers per share. Often, managers will distribute dividends net of purification. For proprietary Wahed funds, we receive purification estimates from the indices we replicate, either at the collective fund level or at the individual security level. 

Our team subsequently reviews daily client balances to calculate the purification amounts and generates unique client statements informing clients of purification amounts. Before reports are distributed, Wahed sends all calculation methods and report templates to its Shariah board to confirm Shariah compliance. Please note that in the US, UK & Mauritius, Wahed does not distribute client funds for purification, but rather informs clients of how much purification they should make based on their average balances in an underlying fund over the designated period.

No lending securities:

Many brokers, banks, and custodians have the ability to lend the securities in an investor’s investment accounts for a fee or a client’s cash deposits for interest income. We ensure that we never engage in securities lending or interest-based lending on client assets or deposits. Additionally, none of our partner brokers are permitted to lend our clients assets. 

You can learn more about this here:

All securities are physical (no synthetic) and genuine ownership is established:

Another conventional investment method is, rather than purchasing the underlying stock, Sukuks, or physical asset, to mimic exposure through the use of derivatives such as swap contracts. Wahed always buys the physical securities and does not deal in any derivatives or impermissible securities. As mentioned previously, the use of any security or fund in our portfolios must be approved by our Shariah board and otherwise cannot be used in our accounts.

Doing Business the Shariah-compliant Way:

Shariah-compliance goes beyond the portfolios we construct for clients. We also ensure that Wahed Invest as a company operates in a Shariah-compliant manner.

The Capital Structure

While the common stock is often issued to founders and employees ‘preferred stock is a different class of equity ownership with terms (features) that provide advantages to investors. These features are typically designed to help them in instances where the targeted company does not work out as planned. Those terms normally include a liquidation preference, anti-dilution restrictions, as well as dividends, and voting controls. For example, preference gives investors a choice at the time of an exit to either get their money back or convert it into the percent of common stock equity in the company that they own. Almost universally, investors typically buy the preferred stock when they invest in a company.

A little-known fact is that not all preferred stock provisions are Shariah-compliant. Wahed has navigated the startup world successfully raising capital funding, revising and removing these provisions, to make a Shariah-compliant ecosystem possible. This is not an easy task, to say the least, but is a part of Wahed’s dedication to the highest standards of overall Shariah-compliance.


Contracts, including those we often overlook, need to be in line with Shariah-compliance. A standard contract with a service provider often takes significantly longer and goes through multiple reviews before it is in line with the Shariah standards we have come to expect.  Major, customized contracts are affirmatively reviewed by our Shariah board before completion.

Shariah Board:

As mentioned above, in an effort to avoid any potential conflicts of interest that may arise with having an internal Shariah Board, Wahed has contracted with Shariyah Review Bureau(“SRB”), an independent Bahrain based consulting firm to provide three elite Scholars to serve as Wahed’s Shariah Board. 

You can find information about them here:

Shariah Audit:

Our Shariah Auditors are the Shariyah Review Bureau. 

SRB are leaders in the Shariah Audit space across the GCC and globally. In Saudi Arabia alone they serve 37% of the Saudi Investment Companies licensed by the CMA, 32% of the Financing Institutions licensed by SAMA, and 52% of the Co-operative Insurance firms listed on the KSA stock exchange. Given their exposure to the industry, they understand what makes the pertinent regulations unique, and have a clear understanding of the AAOIFI Shariah compliance framework within which Islamic businesses such as Wahed operate.

Shariah audits are a retrospective look at past fiscal year activities and are generally risk-frameworks meant to give a detailed analysis of potential issues in Wahed’s overall Shariah-compliance.  Like a financial audit, a Shariah audit reviews financial information and accounts, but also substantive reviews Wahed for activities specific to its operation as a Shariah-compliant firm (e.g., what purification amounts were actually determined?, were all investment securities approved by Shariah advisors before usage in client portfolios as per our Shariah investment policy?). These audits generally take months to perform and are detailed, but are excellent for improving operations and exposing potential Shariah-compliance risks. Although some minor exceptions have been noted during these Audits, Wahed has never received any Audit result which questioned, qualified, or removed the overall Shariah-compliance of its investment portfolio or operations.   An example of a recent final audit report conclusion statement is below:  

2019 Audit Conclusion 


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