Islamic Corporate Social Responsibility in Islamic Banking: Towards Poverty Alleviation

One of the goals of Islamic banking operations is to increase the economic growth towards a better and just society. This study aims to examine the criteria and Islamic instrument of corporate social responsibility towards the creation of a sustainable economic development. Specifically, the study analyses the various approaches to improve the quality of life and alleviate poverty and the methods of applying Islamic instruments to corporate social responsibility programs in Islamic banking. Based on the review of literature and findings resulted from in depth interview with the expertises of Islamic banking in Indonesia, the study reveals that there are six fundamental criteria and 34 items considered critical for corporate social responsibility to make an impact on the society. These criteria are namely: Shariah compliance, equality, responsibility in work, the guarantee of welfare, the guarantee of environmental sustainability and charity for preservation of virtue. Then application of Islamic corporate social responsibility in the society should be guided by two Islamic principles; first, the application of maslahah (the public good) which provides a better framework that managers can use when faced with potential conflicts arising from diverse expectations and interests of any corporation’s stakeholders. Second, corporate social responsibility programs should pay more attention to the importance of social capital in the society. The corporate social responsibility practices in Islamic banking should not only be based on responsibility al kifayah (obligatory upon community) and get a positive corporate image but can also be deemed as a method to alleviate poverty and achieve the true economic goals of Islam. © Authors