Understanding the objectives of Islamic banking: a survey of stakeholders' perspectives

Abstract

Purpose-The purpose of this paper is to survey the viewpoints of various stakeholder groups on the philosophy and objectives of Islamic banking, particularly in a dual banking environment, as in the case of Malaysia. Design/methodology/approach-The paper presents primary data collected by self-administered and postal questionnaires involving a sample of 1,500 respondents representing seven stakeholder groups, namely customers, depositors, local communities, Islamic banking managers, employees, banking regulatory officers and Shariah advisers. An exploratory factor analysis is employed to examine the respondents' perceptions towards various objectives of Islamic banking. Findings-This paper reveals that respondents regard Islamic banking as an institution that should uphold social objectives and promote Islamic values towards their staffs, clients and the general public. Other factors perceived to be important include contributing to the social welfare of the community, promoting sustainable development projects and alleviating poverty. Practical implications-The empirical evidence of this paper affects two aspects; first Islamic banks must not be solely profit-driven entities; rather they must aim at promoting Islamic norms and values to achieve the economic objectives as prescribed by Shariah (Islamic Law). Second, true success for Islamic banking participants depends on the extent to which they can integrate social goals with the mechanics of financial innovation. This research will be of interest to both incumbent and potential entrants into this niche market. Originality/value-The paper reports findings from the first nationwide survey of diverse stakeholder groups in the area of Islamic banking and finance.

Islamic Bankers to have the Prior Right to Justice and Fair Treatment

“…Old age pension was implemented by the Second Caliph Umar who said: "It is far from being humane to let one go helpless in old age after getting service from him in his youth " (Khan, 2014). Wajdi (2008) indicates that the Islamic financial institutions should uphold social objectives, promote Islamic values towards their staff, clients and the general public and contribute to the social welfare of the community, promoting sustainable development projects and alleviating poverty.…”

Islamic Banking and Finance as an Ethical Alternative: A Systematic Literature Review

“…Islamic banking, which is based on ethical and moral values attributable to the teachings of the Qur'an, also gives priority to ethical and social issues and therefore represents an alternative not only for Muslim people (Wajdi Dusuki, 2008). Non-Muslims also look for socially responsible investments.…”

“…With its goal to enhance economic and social welfare, it is often seen as having its own ethical identity (Haniffa & Hudaib, 2007). This results from the underlying Shariah objectivesjustice, fairness and social balancewhich take an important role within the framework (Wajdi Dusuki, 2008). Though Islamic banks are currently experiencing a boom due to their ethical guidelines, they need to focus on their customer's needs to remain competitive in the long-term.…”

“…Islamic banking, which syndicates the principles of Islamic law as its fundamentals has become increasingly significant for the global financial sector in recent decades. Within the global financial market, Islamic banks have established themselves as competitive alternatives with a variety of often differing products and services (Wajdi Dusuki, 2008). Forty years after the first modern Islamic bank had opened its door however it is still difficult to estimate the true size of this fast growing sector (Gheeraert, 2014).…”

Modeling Psychology in Islamic Wealth Management

“…In having multiple goals, Abozaid and Dusuki (2007), Ayub (2007) and Dusuki (2007) emphasized the notion of comprehensiveness of Shariah objectives that promote inner consciousness, fairness and justice accompanied with economic, social and political and financial goals that should balance between the self and social interests and between the individual, family, society and the state. Asutay (2007) highlighted the divergence between Islamic economics whose objectives are social justice and human-centered economic growth and development, and the practices of Islamic banking and finance.…”