Sustainability Practices and Banks Financial Performance: A Conceptual Review from the Islamic Banking Industry in Malaysia

Jan, Amin; Marimuthu, Maran; Mohd, Muhammad Pisol bin; Isa, Mat

doi:10.5539/ijbm.v13n11p61

Cited by 34 publications

(35 citation statements)

References 103 publications

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“…Extant literature suggests that Islamic banks showed a paucity of compliance towards adopting the UN SDGs in terms of sustainable business practices [8][9][10][11][12][13][14][15][16][17][18][19][20][21]. This lack of compliance towards the UN SDGs may increase regulatory challenges and stakeholders' pressure for Islamic banks at different levels.…”

Section: Introductionmentioning

confidence: 99%

Alignment of Islamic Banking Sustainability Indicators with Sustainable Development Goals: Policy Recommendations for Addressing the COVID-19 Pandemic

et al. 2021

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This study aims to establish the link of key Islamic banking sustainability indicators with the United Nations’ Sustainable Development Goals (UN SDGs) as a policy recommendation for sustainable development and to mitigate the distressing impacts of the COVID-19 pandemic on the triple bottom line (people, planet, and profit). To identify the key Islamic banking sustainability indicators, the authors selected the most cited sustainability measurement indexes in Islamic banking. Initially, the indexes were divided into 10 broader themes, and then the key Islamic banking sustainability indicators were shortlisted from each theme based on their high-frequency distribution. The shortlisted sustainability indicators were then ratified to be in line with Islamic philosophy based on “Maqasid al-Shariah” (objectives of Shariah) and were subsequently grouped into the three dimensions of economic, environmental, and social sustainability based on the axial coding method. Finally, the categorized sustainability indicators were aligned with the relevant UN SDGs through the axial coding method for policy formulation, and respectively 12 propositions were developed for policy formulation. This study labeled the methodological process of this study as the ECA method (exploration, categorization, alignment). The new ECA method offers a reverse extension in the “SDG compass” developed by the Global Reporting Initiative (GRI) for aligning business policies with the UN SDGs. The process of aligning Islamic banking sustainability indicators with the UN SDGs will provide a roadmap to recovery from the COVID-19 pandemic in terms of economic, environmental, and social issues. Due to the diversity of the UN SDG framework, it covers multiples aspects for sustainable development. Therefore, considering the UN SDGs in terms of various banking instruments will mitigate the multiple distressing impacts of COVID-19 on the triple bottom line (people, planet, and profit), it will also promote a sustainable development agenda.

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Section: Introductionmentioning

confidence: 99%

Alignment of Islamic Banking Sustainability Indicators with Sustainable Development Goals: Policy Recommendations for Addressing the COVID-19 Pandemic

et al. 2021

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“…It is believed that the banking industry in general [8], and the Islamic banking industry specifically [4,9], have responded very slowly to the modern concept of sustainability. This study is sampling Malaysia for further investigation because Malaysia has the second-highest Islamic banking assets [4], and results from this sample can be generalized for the overall Islamic banking industry.…”

Section: Introductionmentioning

confidence: 99%

“…It implies that low sustainability practices can deteriorate the financial performance of Islamic banks and vice versa. In the context of associated sustainability challenges faced by the Islamic banks [4], and a missing Shariah-based sustainability measurement framework for the Islamic banks [9], it is highly expected that the sustainability practices and reporting of the Islamic banking industry in Malaysia would be very low, and could deteriorate its financial performance. However, it is also vital to first understand if there is any significant impact of sustainability practices on financial performance in the case of Malaysian Islamic banks.…”

Section: Introductionmentioning

confidence: 99%

Sustainable Business Practices and Firm’s Financial Performance in Islamic Banking: Under the Moderating Role of Islamic Corporate Governance

et al. 2019

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This paper examines the moderating role of Islamic corporate governance on the link between sustainable business practices and the firm’s financial performance. A post-crisis period sustainability data for the decade of 2008–2017 was collected by the study. For data collection, this study used the weighted content method. The Generalized Method of Moments (GMM) statistical test was used for empirical testing. The results of the study found that the link between sustainable business practices with the firm’s financial performance measured from the shareholders’ and the management’s perspective is positive, while the subjected link measured from the market perspective was found to be insignificant. This implies that the market stakeholders of the Islamic banks are reluctant for their bank’s spending on sustainable business practices. Interestingly, the insignificant link between sustainable business practices and market performance became significant with the moderating role of Shariah governance and managerial ownership. It shows that the moderating role of Shariah governance and managerial ownership is giving confidence to market stakeholders of Islamic banks for receiving a higher financial return through sustainable business practices initiatives. These results may provide insights for several policymakers of the Islamic banking industry about integrating vital sustainability practices in their business models and about the balanced moderating role of Islamic corporate governance in the link between sustainable business practice and the firm’s financial performance. It provides a roadmap to the Islamic banking industry for efficient management of sustainability practices from an Islamic perspective and subsequently improvement of financial performance through it.

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“…The performance of Islamic banking in Malaysia is studied from different angles. The notable work in the field of Islamic banking in Malaysia is done by (Jan and Marimuthu, 2015a, Jan and Marimuthu, 2015c, Jan and Marimuthu, 2015b, Jan and Marimuthu, 2016, Jan and Marimuthu, 2019, Jan et al, 2019a, Jan et al, 2018, Jan et al, 2019b. Basically, Islamic MFIs are established to help the poor and micro-entrepreneurs to generate an income which finally allowing them to take care of their families (Microcredit Summit, 2004).…”

Section: Literature Reviewmentioning

confidence: 99%

The Perception of Micro-Entrepreneurs towards the Adoption of an Islamic Equity-Based Financing: Evidence from Malaysia

Khar¹,

Isa²,

Marimuthu³

et al. 2019

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This paper aims to explore the perception of micro-entrepreneurs towards the adoption of equity-based financing models in Malaysia. The investigation has covered the following characteristics of equity-based financing such as fairness, partnership, risk sharing, business size, and MFI. The current micro-financial products in Malaysia are focusing more on debt-based financing, which is holistically increasing the financial risk level of entrepreneurs in the case of defaults. There is a dire need to identify the relevancy and viability of equity-based financing in Malaysia, it will ultimately reduce the financial risks of entrepreneurs in case of default. The Islamic financial concept offers a solution to this problem, Musharakah and Mudarabah are among the other Islamic products that offer equity-based micro-financing to entrepreneurs. However, its practical implementation is still vague. In relation to this, the study adopts a cross-sectional study with a sample size of 700 micro-entrepreneurs from the state of Selangor Malaysia. The results of this study found that micro-entrepreneurs tend to register a positive perception of the characteristics of equity-based financing and risk-sharing score as the highest factor towards the adoption of the proposed equity-based PLS model in Malaysia.

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Sustainability Practices and Banks Financial Performance: A Conceptual Review from the Islamic Banking Industry in Malaysia

Cited by 34 publications

References 103 publications

Alignment of Islamic Banking Sustainability Indicators with Sustainable Development Goals: Policy Recommendations for Addressing the COVID-19 Pandemic

Alignment of Islamic Banking Sustainability Indicators with Sustainable Development Goals: Policy Recommendations for Addressing the COVID-19 Pandemic

Sustainable Business Practices and Firm’s Financial Performance in Islamic Banking: Under the Moderating Role of Islamic Corporate Governance

The Perception of Micro-Entrepreneurs towards the Adoption of an Islamic Equity-Based Financing: Evidence from Malaysia

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