Every halal equity product in Pakistan traces back to one methodology. The KMI-30 (KSE Meezan Index) defines which Pakistan Stock Exchange companies count as Shariah-compliant, and the same six screens govern the KMI All Share Islamic Index, the equity funds that benchmark against them, and the quarterly compliance lists that fund advisors publish. If you understand these six tests, you understand how Pakistan decides a stock is halal. In the fiscal year ended June 30, 2026, the KMI-30 returned 39.18%.
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Who runs the index
Al Meezan maintains the KMI-30 recomposition list, applying criteria approved by its Shariah board: Justice (Retd.) Mufti Muhammad Taqi Usmani (Chairman), Dr. Muhammad Imran Ashraf Usmani (SECP-registered advisor, SECP/IFD/SA/005) and Sheikh Essam M. Ishaq of Bahrain. The most recent recomposition shown on Al Meezan's methodology page covers the period ended December 2025. Separately, Al Hilal Shariah Advisors, the firm that certifies funds for HBL, ABL, Alfalah and Mahaana, screens the full market each quarter; its March 2026 report covered 533 listed companies against the same numeric thresholds.
Screen 1: The business itself must be halal
The core business of the company cannot be conventional banking, conventional insurance, alcohol, tobacco, pork production, arms manufacturing or pornography. This is the qualitative gate, and it is absolute: a conventional bank with pristine financial ratios still fails. It is why the Islamic index is heavy in fertilizer, energy, cement and Islamic banks, and why Meezan Bank itself is a major index constituent.
Screen 2: Interest-bearing debt below 37% of total assets
A company financed mainly by interest-bearing loans is not an acceptable investment, even if it makes cement. The threshold is set at 37% of total assets, and the definition is strict: zero-coupon bonds and preference shares count as debt too. Companies close to the line can drift in and out of compliance between recompositions, which is one reason funds re-check holdings quarterly.
Screen 3: Non-compliant investments below 33% of total assets
This screen looks at the asset side: money the company itself has parked in interest-bearing deposits, conventional bonds or other non-compliant instruments must stay below 33% of total assets. A manufacturer sitting on a large conventional treasury portfolio fails even if its operations are clean.
Screen 4: Non-compliant income below 5% of revenue
Almost every listed company earns some impermissible income, usually bank interest on idle balances. The tolerance is 5% of total revenue. Crucially, tolerance does not mean acceptance: that income must be cleansed. Al Meezan's published policy is that the non-compliant amount 'is cleansed out as charity as a pro rata ratio of dividends issued by the company.' Funds do this purification for you; direct stock investors have to do it themselves.
Screen 5: Illiquid assets of at least 25%
At least a quarter of total assets must be illiquid (plants, property, inventory and the like). The fiqh logic: trading shares of a company whose assets are mostly cash and receivables amounts to trading money for money, which triggers riba rules. The screen keeps the index anchored in companies with real productive assets.
Screen 6: Market price above net liquid assets per share
The final test compares the share price to net liquid assets per share, calculated as total assets minus illiquid assets minus total liabilities, divided by shares outstanding. The market price must be higher. Below that level, a buyer would effectively be paying for a pile of liquid assets at a discount, which again raises the money-for-money problem.
What passes and what fails in practice
The screens produce a market with heavy weights in fertilizer (Fauji Fertilizer alone is 16.5% of Mahaana's MII30-tracking ETF), oil and gas exploration, cement, and Islamic banks. Conventional banks, leasing companies and conventional insurers, a huge slice of the wider KSE-100, are simply absent. Scholar discretion exists at the margins and is sometimes documented: Al Hilal's March 2026 report disclosed a temporary exemption for TPL Properties after a restructuring distorted its income ratio, flagged for reassessment the following quarter.
How to actually invest in the KMI-30
Three routes. The KSE Meezan Index Fund is an open-end tracker charging a 0.75% management fee (though it still carries a 2% front-end load, unusual for a passive product); it returned 38.09% in FY26 against the index's 39.18%. The two Shariah-compliant ETFs on the PSX track related but distinct in-house indexes: Al Meezan's MZNPETF (0.50% fee) and Mahaana's MIIETF (0.75% fee, zero loads). Or buy the constituents directly through a broker such as ZLK Islamic and handle purification yourself.
One honest caveat: an index of 30 stocks in a market this concentrated is volatile. The KMI-30 returned 78.70% in FY24, 46.24% in FY25 and 39.18% in FY26, a spectacular run, but Meezan Islamic Fund's history shows FY22 and FY23 were both negative years for Islamic equities. Screens filter for compliance, not for safety. Compare all the tracked products on the HalalWallet investing hub.
Frequently asked questions
How often is the KMI-30 rebalanced? The index is recomposed semi-annually, with Al Meezan maintaining the compliance list; the most recent recomposition shown on its methodology page covers the period ended December 2025. Fund advisors like Al Hilal re-screen the whole market quarterly, so a stock can lose compliant status between index reviews.
Is every KMI-30 company 100% riba-free? No, and the methodology does not pretend otherwise. Companies may earn up to 5% of revenue from non-compliant sources, which is why purification exists: that proportion of your dividend goes to charity. The screens make a stock investable, not immaculate.
What is the difference between the KMI-30 and the KMI All Share Islamic Index? The KMI-30 holds the 30 largest liquid compliant names; the KMI All Share Islamic Index includes every listed company that passes the screens. Atlas Asset Management, for example, restricts its Islamic funds' universe to KMI All Share constituents, with each security further approved by its Shariah advisor.
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Can a stock be halal even if it is not in the KMI-30? Yes. Exclusion from the 30-stock index usually reflects size or liquidity, not compliance. Check the KMI All Share Islamic list or a fund advisor's quarterly screening report before assuming either way.
Who checks that the screens are applied correctly? The SECP's Shariah Governance Regulations 2023 require registered Shariah advisors to certify funds, and each AMC publishes annual Shariah audit certificates. The advisor's SECP registration number appears in fund documents; Atlas even prints it on every fund page of its monthly report.