scholarly journals A Quantitative Study of the Role Shariah Boards and Bank Ownership Structures Play in Enhancing the Financial Performance of Islamic Banks: A Case of Pakistan

ICR Journal ◽  
2020 ◽  
Vol 11 (2) ◽  
pp. 204-224
Author(s):  
Qaiser Abbas ◽  
Sheila Ainon Yussof ◽  
Muhammad Naeem Anjum
Keyword(s):  
Financial Performance ◽  
Supervisory Board ◽  
Islamic Banking ◽  
Central Feature ◽  
Islamic Banks ◽  
Membership Change ◽  
Supervisory Boards ◽  
Banking Institutions ◽  
Shariah Governance

Shariah governance is a central feature and the second layer of corporate governance for Islamic banks (IBs) and Islamic financial institutions (IFIs). Shariah governance is unique to IBs and IFIs due to their possession of Shariah Supervisory Boards (SSB). SSBs serve to ensure that the management of Islamic banking institutions complies with shariah principles. Shariah governance is not only designed to raise the confidence of investors and the public in terms of authenticity and compliance to Islamic banking practices, but also to minimise the fiduciary and reputational risks of Islamic banking institutions. Due to the importance of shariah governance and the role of SSBs in IBs, this research investigates the role of SSBs in influencing the financial performance of IBs with the moderation role of ownership structure in Pakistan. By using nine years of data (2009-2017) pertaining to three Islamic banks in Pakistan, we found that shariah supervisory board reputations, expertise, cross membership, change in composition, shariah qualification, and ownership have significant moderation relationships with the financial performance of IBs. This study is an attempt to provide a deeper understanding of the role of owners and Shariah Supervisory Boards in enhancing the financial performance of Islamic banks for both researchers and policymakers.

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

2019 ◽  
Vol 11 (23) ◽  
pp. 6606 ◽  
Author(s):  
Amin Jan ◽  
Maran Marimuthu ◽  
Rohail Hassan ◽  
Mehreen
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Islamic Banking ◽  
Managerial Ownership ◽  
Business Practices ◽  
Islamic Banks ◽  
Sustainable Business ◽  
Shariah Governance ◽  
Moderating Role

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.

scholarly journals Financial Engineering and Its Role in the Growth and Development of Islamic Banking in Palestine

2018 ◽  
Vol 10 (2) ◽  
pp. 64
Author(s):  
Amer S. Jaber
Keyword(s):  
Financial Engineering ◽  
Growth And Development ◽  
Supervisory Board ◽  
Modern Technology ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Supervisory Boards ◽  
Study Population ◽  
The Impact

The study aimed to identify the role of financial engineering in the growth and development of Islamic banking in Palestine; this is through the acknowledgment of the role of the Sharia Supervisory Board represented by the jurisprudential opinions on new Islamic products and tools. Moreover, the role of the regulations and instructions issued by the Palestine Monetary Authority (PMA) concerning Islamic banks. In addition to the impact of experience and employees’ training, as well as the impact of modern technology on the growth and development of Islamic banking in Palestine.The researcher used the analytical descriptive approach to reach conclusions and recommendations that can be generalized. The study population was employees working at Islamic banks in Palestine, who are (1049) employees. The sample for the study targeted 315 employees, which consists 30% of the total population. The tool used for the study was questionnaires distributed on the sample to collect preliminary data. The number of respondents was (258) employees which composes 81% of the sample.The study has reached many conclusions, and the following are the most important ones: The views of the Sharia Supervisory Board in the banks operating in Palestine play a major role in the growth and development of Islamic banking, while the other areas play a moderate role in the growth and development of Islamic banking in Palestine. The study recommended the need to spread the culture of electronic Islamic banking, and the need to update the regulations and instructions governing Islamic banking. In addition to the need for cooperation and coordination between the Sharia Supervisory Boards of the banks and the unified authority that is affiliated with the PMA.

scholarly journals The Mechanism of Corporate Governance, Financial Performance, and Social Performance in Baitul Maal Wat Tamwil (BMT)

2020 ◽  
Vol 3 (1) ◽  
pp. 1-17
Author(s):  
Hasan Mukhibad ◽  
Akhmad Nurkhin
Keyword(s):  
Financial Performance ◽  
Significant Influence ◽  
Social Performance ◽  
Supervisory Board ◽  
Equation Model ◽  
Education Level ◽  
Structure Equation Model ◽  
Supervisory Boards ◽  
Observation Period

This study aimed to empirically prove the influence of the number and education level of managers, supervisory boards, Sharia Supervisory Board (SSB) and the attendance of Baitul Maal wat Tamwil (BMT) members (owners) in annual member meeting towards on profitability (ROA and ROE), and social performance (zakat performance). The research sample was BMT in Semarang Regency selected by purposive sampling method with an observation period from 2013 to 2017. Data analysis used the Structure Equation Model with the WarpPLS tool. The results showed that the number and education level of managers did not influence financial performance. The education level of the supervisory board had a significant influence on financial and social performance. The number and the education level of SSB changed financial performance, but the education level of SSB did not affect social performance. The Attendance of BMT members at the annual member meeting did not have a significant influence on BMT's financial and social performance improvement. These results indicated the minimal role of members in evaluating BMT performance, both profitability and social performance.

scholarly journals Characteristics of Shari’ah Governance and Incidence of Charity: A case of Pakistan

2020 ◽  
Vol 5 (2) ◽  
pp. 77-91
Author(s):  
Mohammad Ayaz ◽  
◽  
Noman Arshed ◽  
Ikram ul Haq ◽  
◽  
...  
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Quantitative Methods ◽  
Panel Data Analysis ◽  
Supervisory Board ◽  
Financial Statements ◽  
Islamic Banks ◽  
Supervisory Boards ◽  
Unbalanced Panel Data

Characteristics of Shari’ah Governance and Incidence of Charity: A case of Pakistan There are several studies which have evidenced the role of Shari’ah governance on the profitability of Islamic banks for different countries in different data setup. The main purpose of Shari’ah governance is derived from the concept of corporate governance to avoid any non-compliant transactions and book charity against any non- compliant income. There are two kinds of Shari’ah supervisory boards. First is the proactive type that follows the rule of ‘Hisba’ which restricts any non-compliant transaction before it happens. The second type is reactive which detects and reacts to the non-compliant transactions following the Islamic legal system when they happen. The first type would conclude to a reduction in the incidence of charity transactions. In contrast, the second type would conclude to increase in the incidence of charity transaction. The objective of this study is to explore whether the Shari’ah governance of Islamic banks of Pakistan is jointly proactive or reactive. This study is deductive and uses quantitative methods. This study builds an unbalanced panel data of full-fledged Islamic banks of Pakistan using the available data from financial statements. This study is one of its kinds to see the nature of Shari’ah governance based on empirical patterns using Panel FGLS model. The results show that board size, board expertise, and reputation are the reactive factors while the others are proactive factors. Keywords: Shari’ah Supervisory Board, Panel Data Analysis, Shari’ah Disclosure, Shari’ah Controls.

scholarly journals Optimization the Role of Shariah Supervisory Board for Shariah Governance in Islamic Banking

2020 ◽  
Vol 4 (1) ◽  
pp. 47
Author(s):  
Izzani Ulfi ◽  
Ujang Syahrul Mubarrok ◽  
Muhamad Wahyudi
Keyword(s):  
Literature Review ◽  
Banking Industry ◽  
Supervisory Board ◽  
Islamic Banking ◽  
Shariah Governance

Many studies show that one of the biggest challenges in Islamic banking is related to lack of proper and effective Shariah governance. By focusing on the role of Shariah Supervisory Board (SSB), this paper attempts to extract some keys on how to achieve better performance and development of Islamic banking industry by reviewing previous studies. This study was done by using literature review approach. This study concludes that increasing the size of SSB, improving higher skills and competences of SSB members, keeping the independency of SSB member as well as the need of Central Shariah Board (CSB) and shariah auditor would affect to better performance of Islamic banking.

scholarly journals WHY DOES BANGLADESH REQUIRE A CENTRALIZED SHARIAH GOVERNANCE FRAMEWORK FOR ISLAMIC BANKS?

2022 ◽  
Vol 7 (1) ◽  
pp. 24-42
Author(s):  
Md. Kausar Alam ◽  
Oli Ahad Thakur
Keyword(s):  
Central Bank ◽  
Banking Industry ◽  
Monitoring Systems ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Governance Framework ◽  
Governance Practices ◽  
Supervisory Boards ◽  
Shariah Governance ◽  
Regulatory Challenges

The main objective of this article is to describe the logical reasons why a Centralized Shariah Governance Framework (CSGF) provided by the Central Bank of Bangladesh (Bangladesh Bank) is essential for the country’s Islamic banks. In doing so, it identifies the major regulatory challenges (self-developed and disparate use of Shariah Governance (SG) practices) faced by Islamic banks in Bangladesh. It considers an analytical approach to explore the significance of a CSGF for Islamic banks in Bangladesh and examines the current diversified procedures of SG practices. This article reveals that the self-developed SG practices of Islamic banks in Bangladesh have created confusion and pessimism among the practitioners, bankers and even to the general people and regulators which is negatively affecting the overall image of Islamic banks. Such incongruent governance practices have led to inconsistencies in SG structures, implementation procedures, monitoring activities. In addition, this article reveals that these deficiencies usually exist due to weak monitoring systems of the Central Bank, ineffective functioning of individual Shariah Supervisory Boards (SSB) and the absence of comprehensive SGF. The article argues that the Central Bank of Bangladesh should initiate to reform its Islamic banking industry by introducing a CSGF aimed to identify the roles, responsibilities, powers, and functions of SSB; thereby improving governance, accountability, and overall Shariah compliance quality. This article is hoped to be beneficial for the regulators and practitioners to consider revising current practices.   Keywords: Centralization, Bangladesh Bank, Islamic banks, Shariah governance framework.   Cite as: Alam, M. K., & Thakur, O. A. (2022). Why does Bangladesh require a centralized Shariah governance framework for Islamic banks?  Journal of Nusantara Studies, 7(1), 24-42. http://dx.doi.org/10.24200/jonus.vol7iss1pp24-42

scholarly journals Aplikasi Konsep Wakalah dalam Pembayaran Zakat Simpanan: Kajian di Bank Islam Malaysia Berhad (BIMB)

2019 ◽  
pp. 333-354
Author(s):  
Norazira Sharif ◽  
Hairunnizam Wahid
Keyword(s):  
Economic Development ◽  
Research Question ◽  
Wealth Inequality ◽  
Policy Implications ◽  
Islamic Banking ◽  
Islamic Banks ◽  
The People ◽  
Socio Economic Development ◽  
Banking Institutions

Zakat has played an important role in the socio-economic development of Muslims to reduce income and wealth inequality among the people of a country. The contribution of zakat for savings to the total amount of zakat collected by the zakat institution is still relatively small compared to the collection of income on zakat. The importance of paying zakat among Muslims, especially in term of zakat for saving has been previously debated and various programs have been implemented by the zakat institution to ensure that they are able to carry out their responsibilities by paying zakat. In providing Shariah-compliant products, BIMB has partnered with the zakat institution to assist them to increase the amount of zakat for savings. The research question is to what extent Islamic banking institutions can play a role in helping zakat institutions to increase the amount of zakat in savings. This study is important because there are not many studies related to these aspects, especially the role of Islamic banks in increasing the amount of zakat on savings. The objective of this study is to explore the mechanism that BIMB has put in place to implement the zakat on savings and investment on behalf of the depositors by using the concept of wakalah between depositors and banks. This study has referred to several BIMB reports and unpublished reports to investigate all these aspects. This study found that a comprehensive mechanism do exist for BIMB's role in acting as a representative (al-wakil) in paying zakat on savings on behalf of the client (al-mutawakkil). Several suggestions and policy implications are also discussed in this study. Abstrak Zakat telah memainkan peranan yang penting di dalam pembangunan sosio ekonomi umat Islam untuk memastikan kesaksamaan serta mengurangkan jurang agihan pendapatan dan kekayaan dalam kalangan rakyat di dalam sesebuah negara. Sumbangan zakat simpanan daripada jumlah keseluruhan kutipan zakat dilihat masih lagi secara relatifnya kecil berbanding kutipan zakat pendapatan. Kepentingan membayar zakat terutamanya zakat simpanan telah lama diwar-warkan dan pelbagai program telah dijalankan oleh pihak yang berwajib bagi memastikan golongan yang mampu menjalankan tanggungjawab mereka dengan membayar zakat. Dalam menyediakan produk patuh syariah Bank Islam telah berkerjasama dengan pihak zakat bagi membantu meningkatkan jumlah kutipan zakat simpanan. Persoalan kajian ialah sejauhmanakah institusi perbankan Islam boleh berperanan membantu pihak institusi zakat meningkatkan jumlah kutipan zakat ke atas simpanan. Kajian ini adalah penting kerana tidak banyak kajian yang berkaitan dengan aspek perbankan Islam yang turut sama berperanan meningkatkan jumlah kutipan zakat ke atas simpanan. Objektif kajian ini dilakukan untuk melihat mekanisme yang telah dilancarkan oleh pihak BIMB bagi membayar zakat simpanan dan pelaburan bagi pihak pendeposit mereka menggunakan konsep wakalah di antara pelanggan dan bank. Kajian ini merujuk kepada beberapa laporan Bank Islam dan laporan yang tidak diterbitkan untuk meneliti aspek tersebut. Kajian ini mendapati telah wujud satu mekanisme yang komprehensif peranan BIMB dalam bertindak sebagai wakil (al-wakil) dalam membayarkan zakat ke atas simpanan bagi pihak pelanggan (al-mutawakkil). Beberapa cadangan dan implikasi dasar turut dijelaskan dalam kajian ini.  

scholarly journals The Role of Shariah Board in Islamic Banks: Pakistan’s Perspective

2017 ◽  
Vol II (I) ◽  
pp. 356-363
Author(s):  
Muhammad Mushtaq Ahmed ◽  
Zia Uddin ◽  
Muhammad Iqbal
Keyword(s):  
Banking Industry ◽  
Board Members ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Governance Framework ◽  
Advisory System ◽  
Effective Role ◽  
Shariah Governance ◽  
The Individual

The State Bank of Pakistan introduced diversion from the individual Shariah advisory system to the Shariah board mechanism by issuing the Shariah governance framework in 2016 by making it mandatory for the Islamic banks to have an independent Shariah board. In this paper, it is examined whether the Shariah boards have any effective role in the improvement of the Shariah compliance environment of the banks or not? And how to make it more effective for the betterment of the Islamic banking industry? A questionnaire has been developed to study and inspect these issues. The results indicate that even though the role of sharia board could not be denied in the improvement of Shariah compliance in IBIs, however, the mechanism may be further strengthened. The study also suggests that Shariah board members should be involved regularly by making it obligatory on the IBIs to arrange frequent meetings of the board.

scholarly journals Are characteristics of sharia supervisory boards able to improve the performance of islamic banking?

2019 ◽  
Vol 1 (1) ◽  
pp. 1
Author(s):  
Ratna Fitriana ◽  
Agung Yulianto ◽  
Badingatus Solikhah
Keyword(s):  
Financial Performance ◽  
Linear Regression Analysis ◽  
Supervisory Board ◽  
Multiple Linear Regression Analysis ◽  
Profit Sharing ◽  
Islamic Banking ◽  
Supervisory Boards ◽  
Relationship Of ◽  
The Relationship ◽  
Positive Effect

<p><strong>Purpose</strong> - The purpose of this study was to examine the effect of characteristics of Sharia Supervisory Board (DPS) such as DPS scientific background, dual positions of DPS, and the number of supervision days on the performance of Islamic banking. This paper also analyze profit sharing financing as an intervening variabl</p><p><strong>Method</strong> - The population of this study is Islamic Banks in Indonesia in 2012-2017 are 13 sharia bank. The selection of samples in this study using purposive sampling method and selected 8 banks. The data was analyzed using multiple linear regression analysis, path analysis, and sobel test.</p><p><strong>Result</strong> - The results showed that the number of DPS supervision days has a positive effect on the Sharia financial performance, multiple positions of DPS have a positive effect on profit sharing financing. The profit sharing financing is not able to mediate the relationship of the characteristics of the Sharia Supervisory Board to the Sharia financial performance.</p><p><strong>Implication</strong> - Islamic Commercial Banks in Indonesia suggest to improve the financial performance in accordance with sharia principles.</p><p><strong>Originality</strong> - This research is the first study that used intervening variable profit sharing financing.</p>

scholarly journals Dewan Pengawas Syariah Dan Pengungkapan Aspek Lingkungan, Produk Dan Jasa Pada Bank Syariah

2019 ◽  
Vol 4 (2) ◽  
pp. 169-181
Author(s):  
Ari Purwanti
Keyword(s):  
Annual Report ◽  
Supervisory Board ◽  
Social Reporting ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Test Results ◽  
Environmental Aspects ◽  
Board Meeting ◽  
Banking Services

This study aims to provide empirical evidence of the influence of the role of the Sharia Supervisory Board on the disclosure of environmental aspects and aspects of banking services product on Islamic banking in Indonesia based on Islamic Social Reporting in the annual report period 2013-2015. This study performed content analysis and simple regression. There are nine Islamic banks were selected in the study sample were tested. The results showed that the amount of the Sharia Supervisory Board has given a significant effect on the extent of disclosure of environmental aspects and also aspects of banking services products based on Islamic Social Reporting. However, the test results that show the influence of the frequency of the Sharia Supervisory Board meeting on the extent of disclosure of environmental aspects and aspects of banking products based Islamic Social Reporting that proved insignificant.

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