RFP Module 2 cheat sheet

Module 7 - RFP Capstone: Shariah Governance, Screening, Purification and Zakat Integration

• Shariah governance framework has four pillars: Shariah Supervisory Board (SSB) oversight, Shariah review/audit, Shariah risk management, and Shariah research/training; the RFP response must evidence all four, not just an SSB fatwa.

• Fatwa validity is entity- and product-specific: a ruling issued for one institution's contract template does not automatically cover a different originator, asset pool, or jurisdiction; the capstone must map each fatwa to the exact structure it authorises.

• Prohibition set to evidence in any proposal: riba (interest), gharar (excessive uncertainty), maysir (gambling/speculation), and haram sector exposure; each must be addressed at contract, cash-flow, and reporting level.

• Screening decision rule - business activity screen first (sector-level exclusion), then financial ratio screen; a name failing the activity screen is excluded regardless of ratio compliance.

• Common financial ratio thresholds (AAOIFI-style, confirm against the client's mandated standard): interest-bearing debt/total assets < 33%; interest income/total income < 5% (some standards 10%); receivables/total assets < 70% for tradable-equity eligibility.

• Purification formula: purification per share = (non-permissible income per share ÷ total income per share) × dividend per share; disclose the denominator convention (total income vs. revenue) explicitly in the RFP.

• Zakat calculation base for a Shariah-compliant equity portfolio: market value of holdings (or 25% of market value under the AAOIFI 'zakatable assets' proxy) × 2.5%, with the chosen methodology stated and approved by the SSB.

• RFP scoring decision rule: mandatory criteria (licence, Shariah certification, audit rights) are pass/fail and scored before any weighted technical/financial evaluation; a fail disqualifies regardless of price score.

• Capstone deliverable structure: governance chart, product/fatwa matrix, screening methodology, purification and zakat workflow, Shariah audit plan with sampling basis, remediation/escalation path, and KPIs with reporting frequency.