Dividend Purification Explained

Even a Shariah-compliant company may earn a small, incidental amount of income from interest (riba) — AAOIFI tolerates up to 5% of revenue. Because that slice is impermissible, the matching portion of any dividend you receive must be "purified" — given away to charity rather than kept.

How the purification ratio works

The purification ratio is simply the share of the company's income that came from impermissible sources:

• Purification ratio = interest income ÷ total revenue
• Amount to donate = dividend received × purification ratio

For example, if a company earned 2% of its revenue from interest and you received £100 in dividends, you would donate £2 to purify it.

What purification is — and isn't

• It applies to dividends, not to capital gains from selling the share (scholars differ on gains).
• The donated amount should go to charity without seeking reward or tax benefit from it — it is cleansing wealth, not ordinary giving.
• It is separate from zakat. Purification removes tainted income; zakat is the obligatory charity on your overall wealth.

Ethiqly estimates the purification ratio on a stock's analysis page from its reported interest income, so you can calculate what to donate. As always, confirm the details with a qualified scholar.