PERFORMANCE ASSESSMENT OF ISLAMIC BANKS IN THE LIGHT OF MAQASID AL-SHARIAH: A GLOBAL EVIDENCE
Keywords:
Maqasid al-Shariah, Imam al-Ghazali, Maqasid al-Shariah Index, Islamic Banks, Performance Assessment.
Abstract
As an “Islamic” entity, Islamic banks are expected to fulfill the purposes of Islamic law. This study aims to assess the performance of Islamic banks beyond traditional yardsticks, to emphasize their ethical, social, and environmental role in accordance with the higher goals of Islamic law namely Maqasid al-Shariah. Based on Imam al-Ghazali’s concept of Maqasid al-Shariah, we develop a Maqasid al-Shariah index including the 5 objectives of Shariah (Preservation of Life, Religion, Intellect, Posterity, and Wealth). Sekaran’s operationalization method is used to transform the theoretical concept of Maqasid al-Shariah into measurable indicators. The originality of this study stems from two factors: First, we build on previous research to develop a new Maqasid al-Shariah index with 12 dimensions, 25 elements, and 25 indicators. Second, we provide fresh insight into the Maqasid al-Shariah performance of 10 large and well-established Islamic banks from 2017 to 2021. The results of the 5-year study show that Meezan Bank in Pakistan performed the highest score, while Dubai Islamic Bank received the lowest. Furthermore, when comparing the performance of the sampled Islamic banks across the five objectives, we find that they earned the lowest score in the objective of intellect due to their failure to disclose the required information in their annual reports.
JEL Classification Codes: A13, G21, I31, L20, P47.
References
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Bedoui, H. E., & Mansour, W. (2015). Performance and Maqasid al-Shari’ah’s Pentagon-Shaped Ethical Measurement. Science and Engineering Ethics, 21(3), 555‑576. https://doi.org/10.1007/s11948-014-9561-9
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Mohamed, A. G., Zulkarnain, B. M. S., Shamsher, R., & Ziyaad, M. (2021). Communicated Ethical Identity Disclosure (CEID) of Islamic Banks under the AAOIFI and IFRS Accounting Regimes: A Global Evidence. Journal of Islamic Accounting and Business Research, 13(5), 737‑759. https://doi.org/10.1108/JIABR-01-2021-0013
Mohammed, M. O., Razak, D. A., & Taib, F. M. (2008). The Performance Measures of Islamic Banking Based on the Maqasid Framework. Paper Presented on IIUM International Accounting Conference (INTAC IV) Held at Putra Jaya Marroitt, Malaysia. Retrieved from https://www.semanticscholar.org/paper/The-Performance-Measures-of-Islamic-Banking-Based-Razak-Mohamed/e636a73ae59a7a2192c51994a3acfa636032b076
Ngalim, S. M., & Ismail, A. G. (2014). An Islamic Vision Development Based Indicators in Analysing the Islamic Banks Performance: Evidence from Malaysia, Indonesia and selected GCC Countries. Islamic Research and Training Institute P.O. Box 9201, Jeddah 21413, Kingdom of Saudi Arabia. Retrieved from https://ideas.repec.org/p/ris/irtiwp/1436_002.html
Rahman, A. S. A., & Haron, R. (2019). The effect of corporate governance on islamic banking performance: a Maqasid shari'ah index approach on Indonesian islamic banks. Journal of Islamic Finance, 8, 001-018. Retrieved from https://www.researchgate.net/publication/333867331_The_Effect_of_Corporate_Governance_on_Islamic_Banking_Performance_A_Maqasid_Shari'ah_Index_Approach_on_Indonesian_Islamic_Banks
Sekaran, U. (2000). Research methods for business A skill business approach. New York: Wiley. Retrieved from http://196.188.170.250:8080/jspui/bitstream/123456789/2565/1/Uma%20Sekaran%20-%20Research%20methods%20for%20business%20_%20a%20skill-building%20approach-John%20Wiley%20%26%20Sons%20%282003.%29.pdf
Tarique, K. M., Islam, R., Mohamed, M. O., Razak, D. A., & Hamdan, H. bin. (2020). CONSTRUCTING A MAQASID (OBJECTIVE) BASED PERFORMANCE MEASUREMENT INDEX FOR ISLAMIC BANKS. International Journal of the Analytic Hierarchy Process, 12(2), 328-354. https://doi.org/10.13033/ijahp.v12i2.770
Thajudeen, K. S. (2012). Maqasid al-Shariah is one of the very important Shariah aspects in Islamic Finance. INCEIF, The Global University in Islamic finance, Kuala Lumpur, Malaysia. Retrieved from https://www.academia.edu/1984175/Maqasid_Al_Shariah_is_an_important_Shariah_aspect_in_Finance
Alhammadi, S., Alotaibi, K. O., & Hakam, D. F. (2022). Analysing Islamic banking ethical performance from Maqāṣid al-Sharī’ah perspective: Evidence from Indonesia. Journal of Sustainable Finance & Investment, 12(4), 1171‑1193. https://doi.org/10.1080/20430795.2020.1848179
Antonio, M. S., Sanrego, Y. D., & Taufiq, M. (2012). An analysis of Islamic banking performance: Maqashid index implementation in Indonesia and Jordania. Journal of Islamic Finance, 176(813), 1-18. Retrieved from https://journals.iium.edu.my/iiibf-journal/index.php/jif/article/view/2
Asutay, M. (2012). Conceptualising and Locating the Social Failure of Islamic Finance: Aspirations of Islamic Moral Economy vs the Realities of Islamic Finance. Asian and African Area Studies, 11(2), 93‑113. Retrieved from https://durham-repository.worktribe.com/output/1503213
Asutay, M., & Harningtyas, A. F. (2015). Developing Maqasid al-Shari’ah Index to evaluate social performance of Islamic Banks: A conceptual and empirical attempt. International journal of Islamic economics and finance studies, 1(1), 5-64. Retrieved from https://durham-repository.worktribe.com/output/1393283
Bedoui, H. E. (2012). Ethical Competitive Advantage for Islamic Finance Institutions: How should They Measure Their Performance. https://doi.org/10.13140/RG.2.2.15497.65126
Bedoui, H. E., & Mansour, W. (2015). Performance and Maqasid al-Shari’ah’s Pentagon-Shaped Ethical Measurement. Science and Engineering Ethics, 21(3), 555‑576. https://doi.org/10.1007/s11948-014-9561-9
Chapra, M. U. (2008). The Islamic Vision of Development. Thoughts on Economics, The Quarterly Journal of Islamic Economics Research Bureau (Bangladesh), 18(3), 7-38. https://doi.org/10.13140/RG.2.1.4188.5047
Haniffa, R., & Hudaib, M. (2007). Exploring the Ethical Identity of Islamic Banks via Communication in Annual Reports. Journal of Business Ethics, 76(1), 97‑116. https://doi.org/10.1007/s10551-006-9272-5
Hudaefi, F. A., & Noordin, K. (2019). Harmonizing and constructing an integrated maqāṣid al-Sharīʿah index for measuring the performance of Islamic banks. ISRA International Journal of Islamic Finance, 11(2), 282‑302. https://doi.org/10.1108/IJIF-01-2018-0003
ISMANTO, K., ROFIQ, A., GHOFUR, A., & ADINUGRAHA, H. H. THE CONCEPT OF MAQĀṢĪD AL-SYARĪ’AH AL. Social Sciences and Education Research Review, 8(1), 180. https://doi.org/10.5281/ZENODO.5090788
Ibrahim, S. H. M., Wirman, A., Alrazi, B., Nor, M. N. B. M., & Pramono, S. (2004). Alternative Disclosure and performance Measures for Islamic Banks. Kuala Lumpur: International Islamic University Malaysia. Retrieved from https://faculty.kfupm.edu.sa/coe/sadiq/proceedings/SCAC2004/50.ASC089.EN.Shahul.Alternative%20Disclosure%20&%20Performance%20_1_.pdf
Mergaliyev, A., Asutay, M., Avdukic, A., & Karbhari, Y. (2021). Higher Ethical Objective (Maqasid al-Shari’ah) Augmented Framework for Islamic Banks: Assessing Ethical Performance and Exploring Its Determinants. Journal of Business Ethics, 170(4), 797‑834. https://doi.org/10.1007/s10551-019-04331-4
Mohamed, A. G., Zulkarnain, B. M. S., Shamsher, R., & Ziyaad, M. (2021). Communicated Ethical Identity Disclosure (CEID) of Islamic Banks under the AAOIFI and IFRS Accounting Regimes: A Global Evidence. Journal of Islamic Accounting and Business Research, 13(5), 737‑759. https://doi.org/10.1108/JIABR-01-2021-0013
Mohammed, M. O., Razak, D. A., & Taib, F. M. (2008). The Performance Measures of Islamic Banking Based on the Maqasid Framework. Paper Presented on IIUM International Accounting Conference (INTAC IV) Held at Putra Jaya Marroitt, Malaysia. Retrieved from https://www.semanticscholar.org/paper/The-Performance-Measures-of-Islamic-Banking-Based-Razak-Mohamed/e636a73ae59a7a2192c51994a3acfa636032b076
Ngalim, S. M., & Ismail, A. G. (2014). An Islamic Vision Development Based Indicators in Analysing the Islamic Banks Performance: Evidence from Malaysia, Indonesia and selected GCC Countries. Islamic Research and Training Institute P.O. Box 9201, Jeddah 21413, Kingdom of Saudi Arabia. Retrieved from https://ideas.repec.org/p/ris/irtiwp/1436_002.html
Rahman, A. S. A., & Haron, R. (2019). The effect of corporate governance on islamic banking performance: a Maqasid shari'ah index approach on Indonesian islamic banks. Journal of Islamic Finance, 8, 001-018. Retrieved from https://www.researchgate.net/publication/333867331_The_Effect_of_Corporate_Governance_on_Islamic_Banking_Performance_A_Maqasid_Shari'ah_Index_Approach_on_Indonesian_Islamic_Banks
Sekaran, U. (2000). Research methods for business A skill business approach. New York: Wiley. Retrieved from http://196.188.170.250:8080/jspui/bitstream/123456789/2565/1/Uma%20Sekaran%20-%20Research%20methods%20for%20business%20_%20a%20skill-building%20approach-John%20Wiley%20%26%20Sons%20%282003.%29.pdf
Tarique, K. M., Islam, R., Mohamed, M. O., Razak, D. A., & Hamdan, H. bin. (2020). CONSTRUCTING A MAQASID (OBJECTIVE) BASED PERFORMANCE MEASUREMENT INDEX FOR ISLAMIC BANKS. International Journal of the Analytic Hierarchy Process, 12(2), 328-354. https://doi.org/10.13033/ijahp.v12i2.770
Thajudeen, K. S. (2012). Maqasid al-Shariah is one of the very important Shariah aspects in Islamic Finance. INCEIF, The Global University in Islamic finance, Kuala Lumpur, Malaysia. Retrieved from https://www.academia.edu/1984175/Maqasid_Al_Shariah_is_an_important_Shariah_aspect_in_Finance
Published
2023-11-22
How to Cite
Ammar, A. (2023). PERFORMANCE ASSESSMENT OF ISLAMIC BANKS IN THE LIGHT OF MAQASID AL-SHARIAH: A GLOBAL EVIDENCE. International Journal of Islamic Banking and Finance Research, 11(2), 20-31. https://doi.org/10.46281/ijibfr.v11i2.2124
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2023 Asma Ammar
This work is licensed under a Creative Commons Attribution 4.0 International License.
