The Sharia Supervisory Board: Does it Influence Corporate Social Responsibility Disclosure by Islamic Banks? A Review

Abstract

This paper aims at reviewing current empirical studies on Corporate Social Responsibility (CSR) disclosure in Islamic banks in an attempt to elicit a general conclusion of relevance of the Sharia Supervisory Board (SSB) to the level of Islamic Banks' corporate social responsibility disclosure and its improvement. The paperis based on a comprehensive review of researches that explore and discuss the issue of CSR disclosure in Islamic banks. The study suggests that despite Islamic banks' assertion of commitment to Sharia teachings, such commitment does not appear to be translated in their disclosure of socially related undertakings; their CSR disclosure is far below average. The influence of the SSB on CSR disclosure is found to be a positive one. This implies that SSBs have the potentials to further enhance and improve the quality of Islamic banks CSR reporting. This however, requires changes regarding the position and functioning of SSB as an element of Sharia corporate governance. The paper contributes to the growing debate on CSR from Islamic perspective by providing some insights and suggestions and opens doors for more researches to arrive at a deeper understanding of the determinants of disclosure practices in Islamic banks.

The Influence of Financial Performance and Non Financial Performance on Islamic Social Responsibility Disclosure: Evidence From Islamic Banks in Indonesia

“…Social responsibility disclosure is influenced by the implementation of the duties and responsibilities of the sharia supervisory board, because the sharia supervisory board has an important role in Islamic banks. If the implementation of the duties and responsibilities of the sharia supervisory board is done well, the disclosure of Islamic social reporting in the annual report will be good (El Hussein, 2018). The results of Azhar and Bukair (2013) and Inuzula, et.…”

Islamic Bank: A Bank of Ethics in Compliance with Corporate Social Responsibility

“…Sadly, Islamic banks have not demonstrated that they have made their best effort to establish a connection between what is ethical and the actual transactions that take place in the financial world according to Islamic values (El Hussein, 2018). Because it places such a high emphasis on the moral and ethical elements of business operations and evaluating the operations and products to be supported, Islamic Bank has the potential to play a significant part in promoting socially beneficial investments.…”

“…A stringent check needs to be correctly carried out to circumvent this situation. In terms of financing, Islamic banks are quite similar to their conventionally organized counterparts (El Hussein, 2018). Why ethics is such an important factor for consumers, the simple answer is that the future of marketing opportunities in Islamic banking lies in offering values without compromising on ethics.…”

“…Charity Bank surveyed as part of their 2011 annual review, the results of which showed that 95 percent of respondents said that the bank's loan had been a significant factor in the organization's success in achieving its mission, and 53 percent said the loan had assisted them in growing their operations. It has even given away 150 million pounds in loans to charitable organizations and social businesses (El Hussein, 2018). However, it still maintains a deposit growth rate of 42 percent each year, a loan portfolio growth rate of 33 percent each year, and a loan loss rate below 0.5 percent.…”

“…One of the final results that we may receive from Islamic Banking should be the use of the Akhlakul Karimah concept, which translates to "noble character." Several traditional banks have locations outside of the country, such as Co-operative Bank, Smile Bank, and JAK Medlemsbank, in response to the growing need for a commercial organization, banking institutions in particular, that operates with a higher degree of moral decency, other financial institutions, some of which have self-identified as co-operative banks, have emerged (El Hussein, 2018). Their operational breadth will be covered in greater detail later on in the findings of this investigation.…”