WhetherShari’ahcompliance efficiency is a matter for the financial performance

Md. Hafij Ullah and Ruma Khanam

Journal of Islamic Accounting and Business Research, 2018, vol. 9, issue 2, 183-200

Abstract: Purpose - Shari’ahis the foundation of Islamic banks. Although all the Islamic banks required complying with theShari’ahrequirements fully, the level of compliance differs among the Islamic banks. At the same time, Islamic banks have been performing well, but all do not demonstrate similar financial performance. This paper aims to explore whetherShari’ahcompliance efficiency makes any difference in financial performance of Islami Bank Bangladesh Limited (IBBL). Design/methodology/approach - This study used IBBL as a case. For exploring the issue of study, this paper applied an e-mail interview approach and interviewed 24 interviewees including financial analysts, IBBL clients and executives of regulatory bodies, the IBBL and other Islamic- and interest-based traditional banks. Interview opinions are then analyzed and interpreted for a deeper understanding of the topic. Findings - The study observed that some other factors influence the financial performance of IBBL, butShari’ahcompliance is the dominant instinct of acquiring the leading position. SuperiorShari’ahcompliance creates internal strengths and external opportunities that facilitate IBBL in achieving higher financial performance. Most interviewees argued thatShari’ahis the only disposition that makes IBBL unique. Moreover, the bank that considerably followsShari’ahgets better financial outcomes. Research limitations/implications - The study used a qualitative method using interview responses only for evaluating the relationship betweenShari’ahcompliance and financial performance. Further study may be conducted based on a quantitative approach. Practical implications - This paper expects to uphold the significance ofShari’ahin improving the financial performance of IBBL and simultaneously motivating the parties associated with the Islamic banks in enhancing the level ofShari’ahcompliance. Moreover, this study provides new insights into the importance Islamic banks and their performance in relation to the choice of customers. Originality/value - This study explores the significance ofShari’ahcompliance in creating avenues for greater financial performance and develops a model showing the ways howShari’ahcompliance leads Islamic banks to achieve higher financial positions.

Keywords: Bangladesh; Shari’ah compliance; Financial performance; IBBL; Islamic bank (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-01-2016-0001

DOI: 10.1108/JIABR-01-2016-0001

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