Halal ETFs & Index Funds In Saudi Arabia

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Best shariah compliant ETFs & index funds in Saudi Arabia:

Chimera S&P KSA Shariah ETF – SAUDIA – tracks S&P Shariah 35/20 index; major holdings include Al Rajhi, Aramco, STC; pays semi-annual dividends.
Albilad Saudi Sovereign Sukuk ETF – invests in Saudi sovereign sukuk; offers monthly payouts; overseen by Albilad Capital Shariah Committee.
Alinma Saudi Equity Index Fund – follows Alinma Tadawul Shariah Index; diversified across finance, energy, and materials sectors.
ANB MSCI Saudi Arabia Islamic Index Fund – tracks MSCI Islamic Index with core holdings in STC, Al Rajhi, and SABIC Agri; income reinvested.

By 2026, Saudi Arabia’s economy is projected to host over 1,549 investment funds. These funds follow strict screening processes to exclude industries that conflict with Islamic investing principles, offering investors a clear way to align their financial objectives with their faith. Whether for long-term wealth building or portfolio diversification, Shariah-compliant index funds and ETFs now provide access to well-regulated and ethical investments that mirror both local market trends and the broader Gulf investment landscape.

Risk warning: All investments carry risk, including potential capital loss. Economic fluctuations and market changes affect returns, and 40-50% of investors underperform benchmarks. Diversification helps but does not eliminate risks. Invest wisely and consult professional financial advisors.

What are halal ETFs & index funds?

Exchange-Traded Funds (ETFs) are investment funds that trade on stock exchanges, just like individual stocks. They bundle together a diversified portfolio of assets — such as stocks or bonds — and allow investors to buy or sell shares throughout the trading day.

Index Funds, in contrast, are mutual funds designed to passively track the performance of a specific market index — like the S&P 500 or MSCI World. Unlike ETFs, index funds are not traded throughout the day and can only be bought or redeemed at the end-of-day price. They often have slightly lower trading flexibility but can offer long-term, cost-efficient exposure to the same diversified baskets of assets. Explore how halal index funds differ.

What makes either halal is the compliance of their underlying assets and financial structures with Islamic principles. A halal ETF or index fund must:

Exclude companies involved in prohibited (haram) activities like alcohol, gambling, pork, or conventional banking.
Adhere to financial ratio screens (e.g., limits on interest-bearing debt or non-halal income).
Be audited or certified by a recognized Shariah board or follow standards from bodies like AAOIFI or MSCI Islamic Indexes.

In essence, halal index funds and ETFs offer faith-based investors a way to access diversified, passive investment vehicles — without compromising on Shariah principles.

Saudi Arabia investment market overview

Growth in total investment funds as of H1 2025. The Saudi CMA reported that by mid-2025, the number of investment funds had risen to 1,549, with total subscribers surpassing 1.72 million.
Breakdown of public vs. private funds. Of the 1,549 total funds:
- Public funds: 433
- Private funds: 1,116
Halal compliance. While exact 2026 figures aren't fully broken out, Saudi Arabia continues to show strong Islamic finance presence, with 282 registered Islamic funds as of Q3 2024, representing ~46% equity focus and nearly 28.5% global Islamic AuM share.

Top halal ETFs & index funds in Saudi Arabia with key metrics

Saudi investors have access to several Shariah-compliant exchange traded funds as well as funds which track market indices designed to align with Islamic finance standards. Below is a comparative overview.

Leading Shariah-Compliant ETFs & Index Funds in Saudi Arabia (2026)
Fund Name	Index Tracked	Fund Type	Launch Year	Dividend Policy	AUM (SAR)	Key Holdings / Assets	Shariah Oversight
Chimera S&P KSA ShariahETF – SAUDIA	S&P Saudi Arabia Shariah Liquid 35/20 Capped Index	ETF	2022	Semi-annual	320 million	Al Rajhi Bank (32.7%), Saudi Aramco (13.2%), STC (7.3%)	SCA-regulated, S&P Shariah screening
Albilad Saudi Sovereign Sukuk ETF	Albilad IdealRatings Saudi Sovereign Sukuk Index	ETF	2020	Monthly	64.9 mn	Sovereign sukuk by Ministry of Finance	Albilad Capital Shariah Committee
Alinma Saudi Equity Index Fund	AlinmaTadawul Shariah Index	Investment Fund	~2010s	Reinvested	106.14 million	Diversified across finance, materials, energy	Alinma Investment Shariah Committee
ANB MSCI Saudi Arabia Islamic Index Fund	MSCI Saudi Arabia Islamic Index	Investment Fund	2020s	Reinvested	N/A*	STC, Al Rajhi Bank, SEC, SABIC Agri-Nutrients	ANB Board + MSCI Islamic Scre
Riyad Saudi Equity Sharia Fund	Custom Shariah-compliant benchmark	Investment Fund	1996	Reinvested	1,082 mn	Alinma Bank, Arabian Centres, SABB Takaful	Riyad Capital Shariah Board

For a more universal list, check this roundup of top halal ETFs and index funds globally.

Performance metrics

Understanding the performance of halal ETFs and index funds is essential for evaluating their long-term viability. This section highlights key return rates, expense ratios, and fund sizes, offering investors a clear comparison of Shariah-compliant products both within Saudi Arabia and globally. The data below reflects recent metrics as of 2026.

*An expense ratio is the annual fee that an investment fund, like an ETF or index fund, charges its investors to manage and operate the fund. It's expressed as a percentage of the fund's average assets under management (AUM).

Enhanced performance metrics for Shariah-compliant funds in Saudi Arabia
Fund name	AUM (SAR/AED)	Expense ratio	Dividend policy	Screening methodology
Chimera S&P KSA ShariahETF – Income (SAUDIA)	AED 105.5 m (~SAR 97.2 m)	1.00%	Semi‑annual	S&P Shariah Index screening excluding non‑permissible sectors
Albilad Saudi Sovereign Sukuk ETF	~SAR 76.3 m (unverified)	Not specified	Monthly	Albilad Capital’s Shariah Committee directives (no public fee)
Riyad Saudi Equity Sharia Fund	SAR 915.9 m	Not specified	Reinvested	Riyad Capital’s Shariah Committee approved portfolio (no fee found)
Alinma Saudi Equity Fund	SAR 106.1 m	0.55%	Reinvested	Alinma Investment’s Shariah Committee approved portfolio

Enhanced performance metrics for global Shariah-compliant funds in Saudi Arabia
Global ETF/Fund Name	5‑Year CAGR	Expense Ratio	Notes
SPUS (S&P 500 Sharia ETF)	~17.6%	0.45%–0.49%	S&P Sharia compliant U.S. large-cap ETF
HLAL (WahedFTSE USAShariah ETF)	~15.8%	0.50%	FTSEShariah U.S. index ETF
Amana Growth Fund (AMAGX)	~14.9%	0.87%	Global Shariah equity fund focused on tech/health

Here is a bar chart comparing the 5-Year CAGR/Expected returns of major Shariah-compliant funds:

Chimera SAUDIA ETF and Alinma/Riyad equity funds show stable returns around 6–7%.
Global ETFs like SPUS and HLAL, along with Amana Growth Fund, deliver higher long-term performance (14–17%).

5-Year CAGR of Popular Halal ETFs

Shariah screening methodologies

Shariah screening isn’t just about removing companies involved in alcohol or gambling. It’s a rigorous financial and ethical filtration system that filters out companies based on both what they do and how they manage their money. The process is designed to ensure investors only support businesses that align with Islamic values. But what’s rarely discussed is how dynamic and region-specific this screening is, especially in markets like Saudi Arabia, where Islamic finance is deeply rooted in the regulatory and economic system.

When it comes to Islamic index funds and ETFs in Saudi Arabia, the Shariah screening process follows specific thresholds set by local and global boards. These filters go beyond surface-level checks and dig into the financial guts of each company. Here are some of the lesser-known but critical parameters:

Business activity screen. The company’s core business must not involve prohibited (haram) industries such as alcohol, pork, gambling, adult entertainment, tobacco, or conventional financial services (e.g., interest-based banks or insurers).
Debt screen. The total interest-bearing debt should not exceed 33% of the company’s total assets (some benchmarks use market cap instead). This limits exposure to riba (interest).
Non-compliant income threshold. Revenue generated from non-permissible activities (e.g., incidental interest income or minor haram operations) must be below 5% of total revenue.
Cash and liquid assets screen. Cash and interest-bearing securities must not exceed 33% of total assets to ensure companies aren’t earning passive interest income.
Accounts receivable screen. Accounts receivable and cash combined should typically be less than 50% of total assets, since excessive receivables may indicate reliance on credit-based sales.
Purification requirement. Any non-compliant income (e.g., from interest or non-halal business activity) must be purified, that is, donated to charity and not retained as profit.
Shariah board oversight. The index provider must have an independent Shariah board or advisors to screen and regularly audit the index components.

Why are shariah-compliant funds important in Saudi Arabia?

With Vision 2030 pushing for economic diversification, there’s been a parallel rise in Shariah compliant ETFs and index funds in Saudi Arabia, serving both local and global investors seeking ethical exposure to regional markets. What sets these ETFs and index funds apart is not only their adherence to Islamic finance rules, but also how they reflect Saudi economic trends, like weighting towards petrochemicals, Islamic banking, and sovereign-linked entities.

Unlike conventional ETFs and index funds that passively track market indices, Shariah-compliant ETFs are built with a dual filter, one financial, one religious. A company may meet profitability or growth benchmarks, but it still gets excluded if it derives significant income from interest, alcohol, or conventional insurance. What’s rarely discussed is that these funds also avoid companies involved in non-transparent governance practices, even if they pass financial filters. Many funds in the Saudi market are reviewed quarterly by independent Shariah boards, which gives them a dynamic screening process rather than a static checklist.

How to invest in halal index funds in Saudi Arabia?

Step 1: Choose the right investment platform

Options include: Saudi banks (e.g., Alinma, Riyad, Albilad), licensed brokers, or digital platforms.
Ensure the platform is regulated by the Capital Market Authority (CMA) and supports Shariah-compliant products.
You may also choose international brokers, provided they offer Islamic accounts and are legal in your region. A few options are presented below for you to compare:

Best brokers that offer Islamic account
	Currency pairs	Min. deposit, $	Regulation	TU overall score	Open an account
ZForex	50	10		7.89	Go to broker Your capital is at risk.
FOREX.com	80	100	CIMA, FCA, FSA (Japan), NFA, IIROC, ASIC, CFTC	6.82	Study review
XM	57	5	CySEC, FSC (Belize), DFSA, FSCA, FSA (Seychelles), FSC (Mauritius), SCA (United Arab Emirates), CMA (Kenya)	9.3	Go to broker Your capital is at risk.
OANDA	68		FSC (BVI), ASIC, IIROC, FCA, CFTC, NFA	6.87	Go to broker Your capital is at risk.
Plus500	60	100	CySEC, FCA, ASIC, FMA, FSCA, FSA Seychelles, EFSA, MAS, DFSA, SCB	7.54	Go to broker 80% of retail CFD accounts lose money.

Step 2: Verify Shariah compliance

Look for funds listed under “Islamic ETFs in Saudi Arabia” or “Shariah-compliant index funds.”
Confirm that the fund’s Shariah board, screening methodology, and rebalancing policy are disclosed and up to date.

Step 3: Review fund details

Check the tracked index, sector allocation, fund size, dividend policy, and historical performance.
Assess whether the fund constituents and screening rules match your risk and religious tolerance.

Step 4: Open an investment account

Complete KYC (Know Your Customer) requirements, which typically include ID verification, income details, and investment profile.
Most platforms offer Islamic portfolio options - ensure you select this during account setup.

Step 5: Place your investment

ETFs. Buy directly via a trading platform during market hours (e.g., Tadawul).
Index funds. Submit purchase instructions via the bank or online portal; orders are processed at day-end NAV.

Step 6: Monitor and rebalance

Track fund performance and Shariah updates regularly.
Reinvest dividends or adjust your portfolio based on market shifts or personal goals.

If you’re exploring ethical options in general, this guide to halal investment types provides a helpful overview.

Halal ETFs vs index funds in Saudi Arabia

Halal ETFs and index funds in Saudi Arabia may seem similar, but they operate differently and affect your returns, liquidity, and compliance in unexpected ways.

ETFs have real-time trading benefits. Halal ETFs let you trade anytime during market hours, unlike index funds which only update prices once a day.
Index funds are slower but cheaper. Some Shariah compliant index funds in Saudi Arabia charge lower management fees since they’re not actively traded on the exchange.
Liquidity makes ETFs more flexible. If you want to exit or rebalance fast, ETFs are better. Index funds can take a day or two for redemptions to settle.
ETFs require more investor discipline. Real-time access can tempt overtrading. Index funds slow you down, which can be good for long-term investing habits.
Not all ETFs follow the same fatwa. ETFs listed on Tadawul may differ in screening methods or purification rules depending on which Shariah board they follow.
Some index funds use local benchmarks. This means you’re tracking stocks designed to reflect Saudi market dynamics, not just general Islamic compliance.
Tax implications vary by type. Some ETFs, especially international ones, may trigger dividend tax or withholding taxes that local index funds avoid.
Halal ETFs often carry higher tracking error. Since they must screen out certain sectors, they may deviate more from the benchmark compared to broader Islamic index funds.

Halal ETFs vs. index funds in Saudi Arabia
Feature	Halal ETFs	Halal Index Funds
Trading Mechanism	Traded on the stock exchange throughout the day	Bought/sold through the fund company at end-of-day NAV
Liquidity	High; can be bought or sold anytime during market hours	Lower; trades executed only once daily after market close
Pricing	Market-driven; may include bid-ask spreads	Based on Net Asset Value (NAV) at day’s end
Accessibility	Requires brokerage account; subject to exchange availability	Accessible via banks or fund platforms; more retail-friendly
Fees and Expenses	Typically lower due to passive management	May have higher fees, depending on structure
Dividend Policy	Often distributes dividends (e.g., semi-annually)	Dividends are reinvested or distributed based on fund terms
Transparency	High - daily holdings disclosure	Varies - some disclose monthly or quarterly
Examples in Saudi Arabia	Chimera S&P KSA ShariahETF, AlbiladSukuk ETF	Riyad Saudi Equity Sharia Fund, Alinma Equity Index Fund

If you’re willing to explore other halal investment options in Saudi Arabia, you may refer to any of our guides below:

Islamic finance regulation in Saudi Arabia

The Capital Market Authority (CMA) enforces strict regulatory compliance, ensuring all licensed funds meet local Shariah standards. For those evaluating islamic index funds and ETFs in Saudi Arabia, this regulatory environment boosts confidence and safeguards investor interests.

Risks and challenges

Investing in Shariah compliant index funds in Saudi Arabia may seem low-risk, but there are lesser-known challenges that beginners must be aware of.

Shariah screening isn’t uniform. One fund may include a stock that another rejects due to differing scholar boards or tolerance thresholds for non-compliant income.
Sector weightings are unusually concentrated. Due to the Shariah screen, funds may be overweight in energy, real estate, or industrials and underexposed to innovation sectors.
Periodic purging causes forced selling. If a stock becomes non-compliant after quarterly screening, the fund must sell it immediately, which can affect returns.
Low liquidity can trap investors. Some halal ETFs in Saudi Arabia have thin trading volumes, making it hard to exit without impacting the price.
Dividend purification reduces actual yield. Even if a company pays dividends, the fund may have to cleanse a portion tied to non-halal income, shrinking real returns.
Passive funds can't adapt quickly. Index-tracking halal funds can't respond fast to events like regulatory crackdowns or geopolitical shocks.
Market timing isn’t optimized. Many funds rebalance quarterly, missing short-term market shifts that active investors can exploit.
Halal status does not equal financial health. A stock can meet all Shariah rules yet still be poorly managed or heavily volatile, catching new investors off guard.

Boost halal index fund returns by exploiting rebalancing windows and sukuk-linked dividend cycles

Most new investors focus on past performance or whether a fund is officially Shariah compliant. But here’s something they usually miss: these funds often update their portfolios every few months based on screening rules. If you keep track of when these updates happen, you can enter just before quality stocks are added. That matters because when a stock gets included, big funds start buying it too, and that push can work in your favor if you’re already in.

Here’s another move that most people overlook. Some halal funds invest in sukuk, and those instruments pay out on a fairly regular cycle. If you plan your investments around those payout periods, you can time your reinvestments to catch the wave. It sounds small, but over time, syncing with that rhythm can help your money grow faster without breaking Shariah rules. It’s about being tuned in, not just being passive.

Conclusion

Shariah-compliant index funds and ETFs in Saudi Arabia represent a well-regulated and growing sector of ethical finance. With over 1,000 funds managed under CMA oversight and increasing investor interest, these instruments offer transparency, diversification, and religious alignment. They cater to both retail and institutional investors, including expats. As the market matures, more halal ETFs and index funds are becoming accessible, making them a viable long-term strategy for values-based investing.

FAQs

Can expats invest in halal index funds in Saudi Arabia?

Yes, expats can access Shariah-compliant funds via authorized platforms, subject to regulatory and account setup requirements.

Do Shariah-compliant funds in KSA pay dividends?

Many halal funds distribute periodic dividends, especially equity-based funds, subject to fund performance and policy.

Are these funds suitable for retirement planning?

Yes, due to their ethical structure and long-term stability, halal index funds are increasingly used for retirement portfolios in KSA.

What sectors dominate Saudi halal index funds?

Key sectors include energy, healthcare, materials, and telecom- chosen based on Shariah filters and local economic strength.

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