Islamic Economics and Contemporary Studies

Enhancing Islamic Bank Performance: The Synergy Between Shariah Supervisory Boards and Management Responsibilities

2024-05-17T12:48:30+00:00

This article explores the intricate interplay between Shariah Supervisory Boards (SSBs) and the responsibilities of bank management in shaping the performance of Islamic banks. Islamic banking, guided by the principles of Shariah, presents a distinctive model where SSBs ensure compliance with Islamic law, conduct audits, and issue religious rulings. Simultaneously, bank management is tasked with strategic decision-making, product development, risk management, and customer relationship management. The collaboration of these two entities significantly impacts the efficiency, market competitiveness, and financial performance of Islamic banks, creating a compelling value proposition for customers and investors in the contemporary financial landscape. This synergy between SSBs and management is vital in enhancing the overall performance of Islamic banks. The objectives of this study are to discern the roles and responsibilities of both SSBs and bank management and to analyze how their collaboration influences efficiency, market competitiveness, and financial performance. Through this study, we anticipate shedding light on the critical roles of SSBs in ensuring compliance with Islamic law and their rigorous audit procedures, as well as the strategic decision-making, product development, and risk management responsibilities of bank management. The expected outcomes of this research are a holistic perspective on the cooperative efforts of SSBs and management in enhancing Islamic bank efficiency, competitiveness in the financial market, and financial performance. This collaborative approach is anticipated to result in a compelling value proposition for both customers and investors, ultimately underlining the significance of their combined influence on the performance of Islamic banks.

Comparative Analysis of Bai-Al-sarf; Shari’ah Standards of AAOIFI & BNM

2023-04-30T10:50:15+00:00

Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Bank Negara Malaysia (BNM) are the two biggest international standard setting bodies. These bodies issued standards on Shari’ah, auditing and accounting for Islamic Financial Institutions around the globe. AAOIFI is the top recognized whereas BNM is at second in acceptance. This paper makes the comparison of Shari’ah standard on bai Al-sarf issued by AAOIFI and BNM to highlight the differences and make few suggestion for the standardization. Archival research methodology is used for the comparison and analysis. The study compares the similarities and differences between the two sets of standards, with a focus on their principles and objectives. The paper provides valuable insights into the similarities and differences between the two Shari’ah standards. Furthermore, it is suggested to remove the differences in order to increase the acceptability around the globe. The removal of differences and standardize the conditions of Bai-sarf, the practices of trading in currencies may be harmonize throughout the world which enhance the effectiveness and acceptability not only in Muslim world but in Non-Muslim world.

Impact of Covid on Performance and Risk on Islamic and Conventional Banks

2024-05-17T14:03:00+00:00

This study examines the impact of the COVID-19 pandemic on the performance and risk profiles of Islamic and conventional banks, focusing on banks in Pakistan and Bangladesh. The research objectives include exploring the effects of COVID-19 on Islamic and conventional banks, comparing the two types of banks, and determining the relative level of risk between them. The study utilizes annual statements of 5-8 Islamic banks and 5-8 conventional banks from 2015 to 2021 to analyze the data. The findings of the study reveal several important insights. Firstly, the COVID-19 pandemic has a significant negative impact on the financial performance of banks. Secondly, Islamic banks show a positive influence on financial performance, although it is not statistically significant. Thirdly, there is no statistically significant difference in risk profiles between Islamic and conventional banks. However, the pandemic has a significant positive impact on the risk profile of banks. The study has implications for the banking industry and policymakers. It highlights the need for banks to improve their risk management practices to ensure stability and resilience during crises. Islamic banks demonstrate a better level of flexibility and resilience, suggesting that conventional banks can learn from Islamic banking practices. Policymakers should consider the unique characteristics of Islamic banking when developing crisis-related regulations. Bank continuity planning is crucial in mitigating the impact of future crises, and further research is needed to better understand the dynamics of the pandemic's effects on the banking sector. In conclusion, this study contributes to the understanding of how the COVID-19 pandemic affects Islamic and conventional banks, providing valuable insights for scholars and stakeholders. Effective risk management, adaptation, and policy considerations can help banks minimize the negative consequences of crises and contribute to financial stability and economic recovery.

Exploring Service Quality and Customer Satisfaction in Islamic Banking: A Multidimensional Approach

2024-05-17T12:32:34+00:00

This study investigates the relationship between service quality dimensions and customer satisfaction in the context of Islamic banking in Pakistan. Utilizing the SERVQUAL model, this research assesses how tangibles, reliability, responsiveness, assurance, and empathy influence customer satisfaction among both internal and external customers. A structured questionnaire was distributed to a stratified random sample of customers across multiple Islamic banks, and data were analyzed using Smart PLS to evaluate the relationships. The findings reveal significant positive impacts of all five service quality dimensions on customer satisfaction, highlighting the critical role of comprehensive service quality in enhancing customer experiences in Islamic banking. These results not only affirm the relevance of traditional service quality dimensions in the unique context of Islamic banking but also underscore the importance of Shariah compliance in customer perceptions and satisfaction. The study provides actionable insights for bank managers and policymakers aiming to optimize service delivery and promote customer satisfaction in the growing market of Islamic finance. Recommendations are offered for enhancing each dimension of service quality to better meet the needs and expectations of Islamic banking customers.

Compare customer deposits between Islamic and conventional bank: in case of Malaysia

2023-03-14T07:05:03+00:00

Back from the era of prophets till now, there is a huge emphasis on savings. Saving keeps one safe from rainy days so it’s economically as well as religiously emphasized. Initially there were various ways used by people for saving their money but now along with them distinct methods, one is to depositing your money in banks which is a safest way possible. Generally, we know that banks who works on Islamic principles avoid and restrict interests than those who purely works on interests i.e. conventional banks. Islamic banks work on sharing, sharing of profit, loss and risks too. Hence it is obvious that both Islamic and conventional banks have their own way of working and thus dealing with customer deposits.