Assessing the impact of external determinants on the social performance of Islamic banks

Abstract

Purpose Explaining the sources of the differences in social performance among Islamic banks (IBs) is the motivation for this research. Consequently, the purpose of this paper is to investigate the relationship between the development of Islamic finance regulation, the development of an Islamic financial system, the proportions of affected Muslim populations and the level of competition, on the one hand, and the social performance of IBs, on the other. To the best of the authors' knowledge, this is the first study that investigates the impact of the development of regulation and the Islamic financial system on the social performance of IBs. Design/methodology/approach A balanced panel of annual data for 40 banks from 13 countries is applied, spanning 2012–2018. A social performance index with eight dimensions is constructed and measures the social performance of IBs. The index based on qualitative and quantitative data derives from IBs’ annual reports and financial statements. The linear scaling transformation method articulates the quantitative dimensions of the index. In hypotheses testing, the authors use OLS, LSDV, FEM and Random Effect Model to estimate Model (1) and panel-corrected standard errors with Prais–Winsten transformation to estimate Model (2). Findings This unique research confirms the positive impact of the development of Islamic finance regulation on the social performance of IBs. The results show that the development of Islamic finance regulation is consistently significant on all standard significance levels. IBs’ age and the presence of Muslim populations in the country are also significant in most estimators. Research limitations/implications The results of this research highlight a significant value for regulators, shareholders and the management of IBs. Without proper regulation, these banks can hardly operate under the principles and expectations of the Islamic moral economy. Originality/value This is pioneering research that explores the development of Islamic finance regulation and market concentration as a determinant of social performance of IBs. Development of Islamic finance regulation has proved significant in all estimated models, which confirms that a new variable has been discovered among determinants of the social performance of IBs.

Analisis Faktor-Faktor Kinerja Keuangan Terhadap Profitabilitas: Studi Kasus Perbankan Syari’ah di Indonesia Tahun 2020-2022

“…Kebangkitan ekonomi Islam di Indonesia mulai mengalami perkembangan yang signifikan, hal ini ditandai dengan banyaknya lembaga keuangan syari'ah yang mulai berdiri. Salah satunya ditandai dengan berdirinya bank syari'ah di Indonesia yang mempunyai tujuan untuk kemaslahatan umat dalam bidang ekonomi (Meskovic et al, 2023). Selain jumlah penduduk Indonesia yang mayoritas muslim, peluang ekonomi Islam ini diperkuat dengan peraturan yang dibuat oleh pemerintah sebagai landasan hukum dibolehkannya transaksi ekonomi syari'ah, Didirikannya bank syariah selain dilatarbelakangi oleh keinginan umat Islam untuk menghindari riba di dalam semua kegiatan muamalahnya, tetapi juga untuk memperoleh kesejahteraan lahir batin melalui kegiatan muamalah yang sesuai dengan perintah Islam, sebagai alternatif lain dalam menikmati jasa-jasa perbankan yang ada.…”