A study on the corporate social responsibility of Islamic financial institutions : learning from the experience of socially responsible financial institutions in the UK

In order to fulfill the Shari'ah objective of promoting the welfare of society, Islamic financial institutions (IFIs) are expected to consciously align their decisions and actions so that they are `socially responsible'. An integral policy approach towards corporate social responsibility (CSR) would constitute assigning explicit social objectives to IFIs over and above their economic, legal, Shari'ah, and ethical responsibilities. Alternatively, the task of undertaking socially-oriented projects could be argued to be a discretionary responsibility of IFIs, with the objective of CSR being sought merely as a peripheral practice. Recent debates on the evolution of the practice of Islamic finance highlighted the profit and economic efficiency motives of IFIs rather than a concern for socio-economic equity and welfare. A divergence between the economics literature on Islamic finance and the course taken by the practical field of Islamic banking and finance has been argued to be arising over the years. An assessment of this contention motivates this study. The study seeks to assess the Corporate Social Performance (CSP) of a sample of forty six financial institutions offering Islamic products (FIIPs), located worldwide, which have responded to a questionnaire survey and whose CSR practices have been further verified by content analysis. The findings revealed that the majority of the Islamic financial practitioners believed in attributing an integrated social role to FIIPs. However, the practices of the FIIPs reflected a more limited approach to CSR. Most of the FIIPs were observed to be focused on meeting their legal, economic and Shari'ah responsibilities, that is, were concerned with the goals of profit maximisation and for their transactions to meet Shari 'ah compliance. Concurrently, the study appreciates the lessons that can be learnt from the socially responsible financial (SRF) movement that has evolved in the West to promote ethical finance. The ethical worldview of these socially responsible financial institutions (SRFIs) is guided by secular humanistic values which are largely socially determined rather than being drawn from a religious philosophy. The CSR practices of twelve British SRFIs - comprising mainly banks and asset management firms - have therefore been critically analysed through content analysis of their published and electronic materials. The analysis revealed that a sophisticated understanding of CSR shaped the culture of SRFIs which have mostly embedded CSR within their business transactions. CSR constituted an integral, explicit and strategic decision of management, with appropriate management system in place and, in some cases, with indicators developed to assess CSR performance against planned targets.EThOS - Electronic Theses Online ServiceGBUnited Kingdo

Perceptions on the accessibility of Islamic banking in the UK—Challenges, opportunities and divergence in opinion

This study examines the views of UK-based Muslims, Islamic Scholars and Islamic banking employees on the current state of the latter industry, both in practical terms and as regards engagement with the nation’s large, but often marginalised Islamic community. The British Government has recently championed the Islamic banking sector and committed to supporting it as a means of addressing financial services needs and consolidating London’s position as the global centre for Islamic investment. The analysis adds to the substantive literature in two principal ways: (i) by contextualising the evidence via the notions of empowerment, engagement and social justice that underpin both the state’s attempts to foster growth and the central tenets of Islam; and (ii) by placing comparison of the opinions of key groups at the heart of the investigation. The findings reveal that while progress has been made, UK-based Muslims see several substantive impediments to access, including the complex terminology of Islamic banking products, the lack of internet banking facilities and branch networks as well as a generalised lack of interest in marketing on the part of the institutions. Whilst some coincidence of perception is evident, the views of bankers are shown to be out of line with those of the other parties in a number of key areas. For example, bankers appear to see less potential in the role of the internet as a medium for spreading awareness than do either potential customers or religious scholars. The paper therefore concludes with a call for multi-party Ijtihad and Qiyas (deductive analogy) that will encourage industrial outreach and, in so doing, support long-term growth

Higher ethical objective (Maqasid al-Shari'ah) augmented framework for Islamic banks : assessing the ethical performance and exploring its determinants.

This study utilises higher objectives postulated in Islamic moral economy or the maqasid al-Shari’ah theoretical framework’s novel approach in evaluating the ethical, social, environmental and financial performance of Islamic banks. Maqasid al-Shari’ah is interpreted as achieving social good as a consequence in addition to well-being and, hence, it goes beyond traditional (voluntary) social responsibility. This study also explores the major determinants that affect maqasid performance as expressed through disclosure analysis. By expanding the traditional maqasid al-Shari’ah,, we develop a comprehensive evaluation framework in the form of a maqasid index, which is subjected to a rigorous disclosure analysis. Furthermore, in identifying the main determinants of the maqasid disclosure performance, panel data analysis is used by including several key variables alongside political and socio-economic environment, ownership structures, and corporate and Shari’ah governance-related factors. The sample includes 33 full-fledged Islamic banks from 12 countries for the period of 2008–2016. The findings show that although during the nine-year period the disclosure of maqasid performance of the sampled Islamic banks has improved, this is still short of ‘best practices’. Through panel data analysis, this study finds that the Muslim population indicator, CEO duality, Shari’ah governance, and leverage variables positively impact the disclosure of maqasid performance. However, the effect of GDP, financial development and human development index of the country, its political and civil rights, institutional ownership, and a higher share of independent directors have an overall negative impact on the maqasid performance. The findings reported in this study identify complex and multi-faceted relations between external market realities, corporate and Shari’ah governance mechanisms, and maqasid performance

A study on the corporate social responsibility of Islamic financial institutions: learning from the experience of socially responsible financial institutions in the UK

In order to fulfill the Shari'ah objective of promoting the welfare of society, Islamic financial institutions (IFIs) are expected to consciously align their decisions and actions so that they are `socially responsible'. An integral policy approach towards corporate social responsibility (CSR) would constitute assigning explicit social objectives to IFIs over and above their economic, legal, Shari'ah, and ethical responsibilities. Alternatively, the task of undertaking socially-oriented projects could be argued to be a discretionary responsibility of IFIs, with the objective of CSR being sought merely as a peripheral practice. Recent debates on the evolution of the practice of Islamic finance highlighted the profit and economic efficiency motives of IFIs rather than a concern for socio-economic equity and welfare. A divergence between the economics literature on Islamic finance and the course taken by the practical field of Islamic banking and finance has been argued to be arising over the years. An assessment of this contention motivates this study. The study seeks to assess the Corporate Social Performance (CSP) of a sample of forty six financial institutions offering Islamic products (FIIPs), located worldwide, which have responded to a questionnaire survey and whose CSR practices have been further verified by content analysis. The findings revealed that the majority of the Islamic financial practitioners believed in attributing an integrated social role to FIIPs. However, the practices of the FIIPs reflected a more limited approach to CSR. Most of the FIIPs were observed to be focused on meeting their legal, economic and Shari'ah responsibilities, that is, were concerned with the goals of profit maximisation and for their transactions to meet Shari 'ah compliance. Concurrently, the study appreciates the lessons that can be learnt from the socially responsible financial (SRF) movement that has evolved in the West to promote ethical finance. The ethical worldview of these socially responsible financial institutions (SRFIs) is guided by secular humanistic values which are largely socially determined rather than being drawn from a religious philosophy. The CSR practices of twelve British SRFIs - comprising mainly banks and asset management firms - have therefore been critically analysed through content analysis of their published and electronic materials. The analysis revealed that a sophisticated understanding of CSR shaped the culture of SRFIs which have mostly embedded CSR within their business transactions. CSR constituted an integral, explicit and strategic decision of management, with appropriate management system in place and, in some cases, with indicators developed to assess CSR performance against planned targets