Do Shariah Governance Attributes Impact the Islamic Banks’ Performance? Evidence from Pakistan

Abstract

The current study purposes to evaluate the extent of the Shariah Governance (SG) attributes and their effect on Islamic banks (IBs') financial performance. To the extent of the SG attributes, the governance index was created on the four sub-indices which are Shariah board size, number of board meetings, qualification, and Shariah audit committee. Findings exposed that SG attributes in Pakistani IBs significantly influence IBs' performance. The study results indicated that IBs' in Pakistan appreciated the efficiency of the Shariah board considerably and better than the interest-based mechanisms of corporate governance (CG). The present study uses a multiple regression model. The study findings recommended a significant statistical relationship between SG attributes and IBs performance that would suggest that better SG had a causal connotation with immense performance in Pakistani IBs'. The current paper may serve to assist IBs' stakeholders in better understanding the SG practices of IBs'. In addition, the observed significant relationships among the SG attributes and performance should explain to the IBs' administrators the necessity of improving the existing SG requirements. The present study will be contributed to help the stakeholders connected with IBs' be aware of the SG practices of the IBs' in Pakistan

Islamic Social Reporting (ISR), Sharia Supervisory Board (SSB), and Financial Performance: Empirical Evidence on Islamic Banks in the GCC Region

“…Not only that, SSB's role involves providing certification of newly developed financial products, ensuring that products comply with Sharia law, calculating zakat, and acting as the backbone of Islamic banking. [10]. The ultimate goal of SSB is to maintain the credibility of Islamic finance and increase stakeholder confidence in the products and activities offered by Islamic banks [9].…”

“…Islamic banks must operate in adherence to both banking regulations and Sharia principles.Hence, to ensure compliance in Islamic banking operations, the Sharia Supervisory Board (SSB) plays a crucial role by offering its services to Islamic banks [9]. SSB as an independent party that the role of SSB involves providing fatwa, conducting Sharia audits, calculating zakat, and distribution of non-sharia income and guiding the bank in its wider social role [10]. Furthermore, the presence of the SSB can serve as an additional advantage for Islamic banks, as it fosters heightened customer confidence in their banking operations [11].The results of research by Nomran et al, (2020) and Neifar et al, (2020) which reveal that SSB has an effect on the financial performance of Islamic banks is supported by the findings of Alam et al, (2021) in Bangladeshi Islamic banking where SSB can affect financial performance.…”