Sharia supervisory board and social performance of Indonesian Islamic banks

Abstract

This study aims to examine the effect of Sharia Supervisory Board (SSB) characteristics on the level of social performance in Islamic banks in Indonesia. Social function becomes a special feature of Islamic banks that differentiates them from conventional banks. SSB characteristics consist of size, number of meeting, educational qualification, reputation, and cross-membership of SSB members. The data is taken from annual report of Islamic banks in Indonesia for the year 2010-2014 and processed by panel data regression using eviews. The results show that size and reputation of SSB members have significant effect on the social performance while the meeting, educational qualification, and cross membership of SSB members do not have effect on the social performance. The finding also shows that social performance of IBs in Indonesia is relatively high. This study has contribution on the measurement of social performance of Islamic banks and understanding the influence of SSB characteristic on social performance of IBs in Indonesia.

Do corporate and Sharia compliance governance affect enterprise risk management implementation?

“…Two factors that led to this improvement include the highest level of political support, through which President Joko Widodo personally chairs the National Islamic Finance Committee (Komite Nasional Keuangan Syariah or KNKS) to promote Islamic finance in Indonesia and the regulatory developments by Financial Services Authority (Otoritas Jasa Keuangan or OJK) to create level-playing field for IBF in the country. Nugraheni (2018) stated that the size of the Sharia Supervisory Board (SSB) and the position of SSB members in the Sharia National Board (DSN-MUI) have a positive effect on Islamic banks' social performance. Social performance investigated in that research includes the benefaction to economic refinement, to society and the social environment, to their stakeholders, and to the education of human resources.…”

Sharia Compliant in Private Zakat Institutions of Riau

“…SSB can use the meeting to discuss and determine what activities and products are by following per under Islamic principles. The number of meetings conducted by SSB shows that SSB is carrying out its duties (Nugraheni, 2018) cited in Hameed et al, 2004). SSB meeting can also influence the activities carried out by management.…”

“…SSB meeting can also influence the activities carried out by management. As a result of Nugraheni's research, the increasing number of SSB meetings will have an impact on the level of social performance (in the context of Islamic banking) and also have a positive effect on CSR disclosure (Nugraheni, 2018) cited in Naseem et al 2017).…”

“…As in Islamic banks in Indonesia, SSB members are selected by the board of directors of Islamic Bank and also recommendations from the MUI. In addition to a good reputation, SSB members must be sufficiently knowledgeable about Islamic law, even as a significant consideration (Nugraheni, 2018) cited in (Rahman & Bukair, 2013). The SSB criteria stipulated by Bank Indonesia, namely number 6/24 /PBI/2004, are integrity such as good character and morals, competence and financial reputation such as never being listed in bad credit.…”

“…The quality of full disclosure is also determined by the competence and role of SSB (Erlane et al, 2018). SSB competence is influenced by educational background, size, reputation, cross-membership, and the frequencies of meetings (Nugraheni, 2018cited in Farook, Hassan, & Lanis, 2011Rahman & Bukair, 2013). Hence, that SSB becomes an essential part of the governance mechanism (Aribi et al, 2018cited in Besaretal., 2009 Based on Government Regulation Number 14 of 2014, the zakat institution is obliged to be audited.…”