The Shariah Advisory Council (SAC) of the Securities Commission Malaysia is the authority that determines whether a Bursa Malaysia–listed security is Shariah-compliant. It applies a published two-tier screen — business activity and financial ratios — and issues a periodically updated list of Shariah-compliant securities. For a stock loan, that list answers the first of two Shariah questions: whether the underlying counter is itself compliant. Whether the financing is compliant is a separate question, answered by how it is structured.
Any Shariah-compliant share financing on Bursa Malaysia begins with a single fact: is the counter you want to finance on the SAC's list? This note explains what the SAC is, how it classifies securities, and how that classification is used — and, importantly, is not over-used — in structuring a Shariah-compliant stock loan. It is general orientation, not Shariah or legal advice.
Key takeaways
- The SAC is the authority. Established under the Securities Commission Malaysia, the Shariah Advisory Council rules on Shariah matters in the capital market and publishes the list of Shariah-compliant securities.
- Two-tier screening. A company is screened first on its core business activities, then against financial-ratio benchmarks; passing both places it on the list.
- The list is not permanent. It is reviewed and reissued periodically, so a counter can be added — or cease to qualify — on a later review.
- Compliant underlying ≠ compliant financing. The list settles the status of the share; the structure of the facility is a separate question for qualified Shariah advisers.
- Confirmed per transaction. Because the list changes, we verify a counter's status at the time of the transaction rather than assuming it.
What the Shariah Advisory Council is
The Shariah Advisory Council (SAC) is the body established under the Securities Commission Malaysia as the authority on the application of Shariah principles to the Malaysian capital market. It is the reference point for what qualifies as Shariah-compliant in the market: it sets the classification methodology for listed securities, issues resolutions on Islamic capital-market instruments and structures, and maintains the published list of Shariah-compliant securities. Malaysia's Islamic capital market is one of the deepest in the world, and the SAC's role is a large part of why a shareholder in a compliant counter can raise financing without setting a Shariah preference aside.
How a security is classified — the two-tier screen
Classification is not a matter of opinion; it follows a published methodology with two tiers.
The screen, in outline
- Tier one — business activity. The company's core activities are assessed. Businesses built on interest-based finance, gambling, alcohol and non-halal products, or other clearly prohibited activities are excluded at this stage.
- Tier two — financial ratios. Benchmarks limit the contribution of any non-compliant elements — for example the proportion of income or of certain balance-sheet items attributable to non-permissible sources — so that a company whose incidental non-compliant exposure is within tolerance can still qualify.
A company that passes both tiers is classified as Shariah-compliant and appears on the list. A very large proportion of Bursa Malaysia–listed companies do — which is why, for most shareholders enquiring about a Shariah-compliant structure, the counter is already eligible. The specific benchmarks are the SAC's to set and revise; the point for a financing conversation is that eligibility is a determination made against a defined standard, not a judgement we make ourselves.
Why status is confirmed at the time of the transaction
The list is reviewed and reissued periodically. A security can be added on a later review, and one that was compliant can cease to be classified as compliant if its activities or ratios move outside the benchmarks. For a stock loan this has one practical consequence: we treat a counter's Shariah status as something to verify against the latest published list at the time of the transaction, rather than a permanent attribute carried over from an earlier enquiry. It sits alongside the other things that are checked afresh for each facility — the counter's liquidity, its volatility, the free float, and the concentration of the position.
Two Shariah questions, kept separate
The most common misunderstanding is to treat a counter's presence on the SAC list as settling everything. It does not. There are two distinct questions, and the list answers only the first.
| Question | Is the underlying share compliant? | Is the financing structure compliant? |
|---|---|---|
| Who determines it | The Shariah Advisory Council of the Securities Commission Malaysia. | Qualified Shariah advisers reviewing the specific documentation, informed by SAC resolutions. |
| Reference used | The published list of Shariah-compliant securities. | The contractual structure — typically sale-based contracts such as commodity murabahah. |
| Our role | Confirm the counter's current status against the latest list. | Build the facility to be capable of compliance and bring in the appropriate review. |
The mechanics of the second question — how a compliant facility is actually built — are set out in our note on commodity murabahah. The broader case for financing a compliant counter on a Shariah basis is in Shariah-compliant share financing, and the terms used throughout are defined in the Islamic finance glossary.
Frequently asked questions
01What is the Shariah Advisory Council (SAC)?
02How does the SAC decide whether a listed company is Shariah-compliant?
03How often is the list of Shariah-compliant securities updated?
04Does a counter being on the SAC list make my financing Shariah-compliant?
05Where can I check whether a Bursa counter is on the list?
This note is general orientation on the role of the Shariah Advisory Council and its list of Shariah-compliant securities. It is not Shariah, legal, or tax advice, and it does not reproduce the SAC's methodology or list. Whether a particular counter is compliant, and whether a particular structure is compliant, is confirmed against the current SAC list and with qualified Shariah advisers and your own Malaysian counsel as part of each transaction.