Performance Direction towards Performance Achievement: Case on Local Islamic Banks in Malaysia

Abstract

Performance of a company is important for identifying its survival ranking and for its future direction, improvement and development strategy. Bank performance has conventionally been measured using financial ratios and several quantitative indicators, which appraise its financial strength. The same yardstick is being used by Islamic banks to measure their performance. This practice gives rise to the question whether Islamic banks appear to be focusing on Maqasid al-Shari'ah in their achievements or they share the same primary intention of conventional commercial banks, which strive for maximizing shareholders' wealth. Scholars have raised concern that Islamic banks seem to be replicating the conventional banking system and this is creating a widening gap between the theory and practice of Islamic banking. Hence, this study has used a sample of 18 banks in Malaysia to critically review the organization's vision and mission statements based on Maqasid al-Shari'ah by embracing content analysis and behavioral science operationalization method. The results show that the majority of Islamic banks have focused on the concept of establishing justice with emphasis on the elimination of negative elements that breed injustice, whereas conventional banks have put emphasis on profitability of the bank, categorized under the maslahah concept. Since there is different focus between the conventional and Islamic banks, there is a need for Islamic banks to evaluate their performance within their own framework and using their own criteria.

Corporate social responsibility of Islamic and conventional banks

“…Basah and Yusuf (2013) link the concept of Islamic CSR to the Islamic principles of Maqasid-Al-Shariah and maslahah, which may sometimes involve the same meaning (Dusuki and Abdullah, 2007a). Maslahah implies public good or public benefit, whereas Maqasid constitutes the main goal of the Shariah , which is to promote well-being and human development through education, the eradication of poverty (Sairally, 2007) and justice establishment (Amin et al , 2015; Antonio et al , 2012; Shamsudin and Mohammed, 2015). Thus, Islamic banks, as any other Islamic institution, have a sense of social responsibility (Farook, 2007), being urged to respect Maqasid, which may serve as an adequate guide for Islamic CSR (Dusuki and Abdullah, 2007a; Yusuf, 2012).…”

Impact of Cultural and Environmental Factors on the Adoption of AAOIFI Accounting Standards in MENA Countries: Logistic Regression and Neural Networks

“…In the context of the AAOIFIs, studies have shown that a stable Islamic financial environment leads to the achievement of the objective of sustainable development and an improvement in economic growth (Hassan et al, 2019). Islamic accounting standards must also respect several societal values and environmental requirements (Shahwan & Hasan, 2013;Shamsudin & Mohammed, 2015). For this, the adoption of these standards generates economic development and social progress (Asutay, 2008).…”