A company can pass Malaysia’s Shariah screening, carry the Shariah-compliant badge on Bursa Malaysia, and still tell investors almost nothing about whether its business truly lives up to Islamic values. A new academic study shows that gap is real — and it matters more than most investors realise.
What Did the Researchers Actually Study?
Researchers from Universiti Sains Islam Malaysia (USIM) set out to answer a deceptively simple question: among Malaysia’s listed Shariah-compliant companies (ShCCs), how well do they actually disclose their alignment with Maqasid Shariah — the broader objectives of Islamic law?1
Maqasid Shariah goes beyond screening out haram (prohibited) activities. It covers five core protections: faith (al-din), life (al-nafs), intellect (al-‘aql), lineage (al-nasl), and wealth (al-mal). In 2023, Malaysia’s Securities Commission (SC) translated these into a practical guide with six aspirations and 15 measurable principles — everything from environmental responsibility to supporting small businesses and distributing wealth through social finance.
The researchers picked one company — a renewable energy and waste management firm listed on Bursa Malaysia, referred to as Company S Berhad — and ran its 2023 Annual Report through all 15 principles. The method was document analysis: extract relevant disclosures, match them against the SC’s guidance, and see what’s covered and what’s missing.
The headline result? Company S covered 14 out of 15 principles reasonably well. The one it missed entirely was Principle 14 — maximising wealth distribution through social finance, which includes disclosures on zakat (Islamic wealth tax), charity, and donations. For a company marketing itself as a Shariah-compliant green energy pioneer, that is a notable blind spot.
What This Means for Malaysian Investors
Malaysia has 820 Shariah-compliant listed companies as of mid-2024 — about 79% of all public-listed companies on Bursa Malaysia. That is a large number of companies carrying a compliance label that, at present, requires no standardised Maqasid Shariah reporting whatsoever.
The SC’s Maqasid Shariah guidance, released in November 2023, is a step forward. But it is voluntary. Companies are not required to report against it, and there is no standard format for doing so. This means two ShCCs in the same sector can have completely different levels of transparency about their Islamic values — and investors have no consistent basis for comparison.
For a retail investor, this creates a practical problem. The Shariah-compliant label tells you a company has passed a financial screening. It does not tell you whether the company pays zakat, engages with small businesses in its supply chain, supports future generations through environmental stewardship, or distributes wealth equitably. If those things matter to you — and for many Malaysian Muslim investors, they do — you currently have to dig through annual reports yourself, with no guarantee you will find clear answers.
What Should You Do Differently?
Start asking harder questions before you invest in any ShCC.
The Bursa Malaysia and SC websites confirm Shariah-compliant status based on financial ratios and sector screening. That is a floor, not a ceiling. If you want to know whether a company genuinely aligns with Islamic values, look at the annual report and ask:
• Does the company disclose zakat contributions?
• Does it report on environmental impact and preservation of natural resources?
• Does it mention partnerships with small businesses or community programmes?
• Does its financing involve Islamic contracts like sukuk or musharakah — or does it rely heavily on conventional interest-based debt?
Stop treating the Shariah badge as a full endorsement of Islamic values. It is an eligibility criterion, not a quality rating.
The study also has an implicit message for ESG (Environmental, Social, Governance) investors: Maqasid Shariah and ESG overlap significantly. Research cited in the paper found that ShCCs tend to score about 6% higher on ESG metrics than non-compliant peers. Companies that go further and proactively report on Maqasid Shariah principles are likely to attract more long-term, values-driven capital as ESG integration grows in Malaysian markets.
Context and Caveats Worth Knowing
This study has real limitations. It covers a single company over a single year — Company S Berhad’s 2023 Annual Report. The researchers chose it because it is a genuinely Shariah-aligned business in renewable energy, its board is entirely Muslim, and it has maintained compliance since its IPO in 2010. In other words, this is arguably one of the better cases. The findings for a less committed ShCC could look quite different.
The broader literature confirms that Shariah disclosure across Islamic institutions is generally lower than it should be, and most prior research focused on Islamic banks rather than listed companies. This study is one of the first to test the SC’s new Maqasid Shariah guidance against an actual annual report — which makes it genuinely useful as a benchmark, but also means there is very little comparable data yet. The research was funded through a consultation project, though no specific conflict of interest is flagged.
This post draws on: Kamaruddin, M. I. H., Zakaria, N., Mohd Hanefah, M. M., Shafii, Z., & Salleh, S. (2025). Maqasid Shariah disclosure: a case of a Malaysian Shariah-compliant company. Journal of Islamic Accounting and Business Research. Advance online publication. https://doi.org/10.1108/JIABR-05-2024-0164
This content is for educational purposes only and does not constitute financial or investment advice. Always conduct your own research or consult a licensed financial adviser before making investment decisions.