The Corporate Social Performance Indicators for Islamic Banks – The Manager’s Perception

Social performance is incumbent as one of the maqasid Shariah of Islamic banks. A perception study involving questionnaire surveys was conducted of 152 Islamic bank managers in Malaysia as a means of searching for empirical evidence of what constitutes Corporate Social Performance (CSP) indicators for Islamic banks. Using 50  indicators as a CSP construct, the study found that there are forty-seven important indicators for CSP in Islamic banks. The Shariah compliance activities such as annual payment of zakat, transparent measurement of zakat, avoidance of unlawful transactions, and disclosure on the nature and extent of the unlawful transactions are among the most important indicators. However, in the dual Islamic banking framework in Malaysia, managers have a significant difference in perception of the importance of qard hasan financing, number of branches and vicinity, availability of e-banking services, and third party verification for customer services as representative of Islamic banks’ social performance indicators. Remarkably, environmental protection and enhancement activities are considerably important CSP indicators even though the environment does not directly affect or effect Islamic banking activities. This study contributes to the development of social performance indicators specifically for a faith-based business institution from the practitioner perspective. The indicators may be used to assess the incorporation of social function in Islamic banks towards fulfilling the maqasid Shariah and meeting the need of various stakeholders.