Skip to main content

Corporate Social Responsibility and Islamic Financial Institutions (IFIs): Management Perceptions from IFIs in Bahrain

Abstract

Islamic finance is gaining greater attention in the finance industry, and this paper analyses how Islamic financial institutions (IFIs) are responding to the welfare needs of society. Using interview data with managers and content analysis of the disclosures, this study attempts to understand management perceptions of corporate social responsibility (CSR) in IFIs. A thorough understanding of CSR by managers, as evident in the interviews, has not been translated fully into practice. The partial use of IFIs’ potential role in social welfare would add further challenges in the era of financialisation.

This is a preview of subscription content, access via your institution.

Notes

  1. The Holy Quran says that ‘in their wealth there is a certain portion for those who ask for and for those who are in dire need’ (Qur’an: 70:24, 25).

  2. A study of 32 Islamic Banks reveals that the majority carry out Zakah (IIIT, 1996; cited in Maali et al. 2006).

References

  • Abu-Baker, N., & Naser, K. (2000). Empirical evidence on corporate social disclosure (CSD) practice in Jordan. IJCM, 10(3), 18–34.

    Google Scholar 

  • Aggarwal, R. K., & Yousef, T. (2000). Islamic banks and investment financing. Journal of Money, Credit and Banking, 32(1), 93–120.

    Google Scholar 

  • Al-Qaradawi, Y. (2000). Safeguarding the environment in Islamic Sharia. Al-Khaleej.

  • Aribi, Z. A., & Gao, S. (2010). Corporate social responsibility disclosure: A comparison between Islamic and conventional financial institutions. Journal of Financial Reporting and Accounting, 8(2), 72–91.

    Article  Google Scholar 

  • Aribi, Z., & Gao, S. (2012). Narrative disclosure of corporate social responsibility in Islamic financial institutions. Managerial Auditing Journal, 27(2), 199–222.

    Google Scholar 

  • Asutay, M. (2008). Islamic banking and finance: Social failure. New Horizon, 169, 1–3.

    Google Scholar 

  • Beekun, R., & Badawi, J. (2005). Balancing ethical responsibility among multiple organizational stakeholders: The Islamic perspective. Journal of Business Ethics, 60(2), 131–145.

    Article  Google Scholar 

  • Belal, A. R., & Owen, D. (2007). The views of corporate managers on the current state of, and future prospects for, social reporting in Bangladesh: An engagement based study. Accounting, Auditing and Accountability Journal, 20(3), 472–494.

    Article  Google Scholar 

  • Bhagwati, J. (2011). Markets and morality. American Economic Review, 101(3), 162–165.

    Article  Google Scholar 

  • Chapra, U. (1992). Islam and the economic challenge. Leicester: The Islamic Foundation.

    Google Scholar 

  • Chapra, M., & Ahmed, H. (2002). Corporate Governance in Islamic Financial Institutions Occasional Paper No. 6, Islamic Research and Training Institute: Islamic Development Bank, Jeddah.

  • Clarkson, M. B. E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20, 65–91.

    Google Scholar 

  • Cooke, T. E. (1989). Disclosure in the corporate reports of Swedish companies. Accounting and Business Research, 19(74), 113–124.

    Article  Google Scholar 

  • Dusuki, A. W. (2007). The ideal of Islamic banking: A survey of stakeholders’ perception. Review of Islamic Economics, 11, 29–52.

    Google Scholar 

  • Ernst and Ernst. (1978). Social responsibility Disclosure: 1978 Survey, survey of Fortune 500 Annual reports. Cleveland: Ernst and Ernst.

    Google Scholar 

  • EU. (2011). A renewed EU strategy 201114 for Corporate Social Responsibility, COM(2011) 681 final, Brussels, 25.10.2011.

  • Farook, S. (2007). On corporate social responsibility of Islamic financial institutions. Islamic Economic Studies, 15(1), 31–46.

    Google Scholar 

  • Frederiksen, C. (2009). The relation between policies concerning corporate social responsibility (CSR) and philosophical moral theories: An empirical investigation. Journal of Business Ethics, 93, 357–371.

    Article  Google Scholar 

  • Freeman, R. E. (1994). The politics of stakeholder theory: Some future directions. Business Ethics Quarterly, 4(4), 409–421.

    Google Scholar 

  • Gillham, B. (2000). Case study research methods. London: Continuum.

    Google Scholar 

  • Gray, R., Kouhy, R., & Lavers, S. (1995). Corporate social and environmental reporting: A review and a longitudinal study of UK disclosure. Accounting, Auditing and Accountability Journal, 8(2), 47–77.

    Article  Google Scholar 

  • Guthrie, J., & Mathews, M. (1985). Corporate social reporting in Australia. Research in Corporate Social Performance and Policy, 7, 251–271.

    Google Scholar 

  • Guthrie, J., & Parker, L. (1990). Corporate social disclosure practice: A comparative international analysis. Advance in Public Interest Accounting, 3, 159–176.

    Google Scholar 

  • Hackston, D., & Milne, M. J. (1996). Some determinants of social and environmental disclosure in New Zealand companies. Accounting, Auditing and Accountability Journal, 9(1), 77–108.

    Article  Google Scholar 

  • Haniffa, R. & Hudaib, M. (2007). Exploring the Ethical Identity of Islamic Banks via Communication in Annual Reports. Journal of Business Ethics, 76 (1), 97–116.

    Google Scholar 

  • Hanlon, J., Barrientos, A., & Hulme, D. (2010). Just give money to the poor: The development revolution from the global south. Bloomfield: Kumarian Press.

    Google Scholar 

  • Jamali, D., & Mirshak, R. (2007). Corporate social responsibility: Theory and practice in a developing country context. Journal of Business Ethics, 72, 243–262.

    Article  Google Scholar 

  • Kamla, R. (2005). Social Accounting in Selection of Arab Countries: Critical and Postcolonial Perspectives. Unpublished PhD Thesis, Heriot-Watt University, UK.

  • Kamla, R., Gallhofer, S., & Haslam, J. (2006). Islam, nature and accounting: Islamic principles and the notion of accounting for the environment. Accounting Forum, 30(3), 165–245.

    Article  Google Scholar 

  • Kitzmueller, M., & Shimshack, J. (2012). Economic perspectives on corporate social responsibility. Journal of Economic Literature, 50(1), 51–84.

    Article  Google Scholar 

  • Krippendorff, K. (1980). Content analysis: An introduction to its methodology. London: Sage.

    Google Scholar 

  • Lewis, M. (2001). Islam and accounting. Accounting Forum, 25(2), 103–127.

    Article  Google Scholar 

  • Maali, B., Casson, P. & Napier, C. (2006). Social reporting by Islamic banks. ABACUS, 42 (2), 266–289.

    Google Scholar 

  • Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48, 268–305.

    Article  Google Scholar 

  • Miles, M. B., & Huberman, A. M. (1994). Qualitative data analysis (2nd ed.). Newbury Park: Sage.

    Google Scholar 

  • Milne, M., & Adler, R. (1999). Exploring the reliability of social and environmental disclosure content analysis. Accounting, Auditing & Accountability Journal, 12(2), 237–256.

    Article  Google Scholar 

  • Rice, G. (1999). Islamic ethics and the implications for business. Journal for Business Ethics, 18(4), 345–358.

    Article  Google Scholar 

  • Safieddine, A. (2009). Islamic financial institutions and corporate governance: New insights for agency theory. Corporate Governance, 17(2), 142–158.

    Article  Google Scholar 

  • Sarker, M. A. (2000). Islamic business contracts, agency problem and the theory of the Islamic firm. International Journal of Islamic Financial Services, 1(2), 12–18.

    Google Scholar 

  • Sheng, A and Singh, A (2012). Islamic Finance Revisited: Conceptual and Analytical issues from the perspective of Conventional Economics, Working Paper No. 430, Centre for Business Research, University of Cambridge.

  • Tinker, T. (2004). The enlightenment and its discontents: Antinomies of Christianity, Islam and calculative science. Accounting, Auditing and Accountability Journal, 17(3), 442–475.

    Article  Google Scholar 

  • Ullah, S., & Jamali, D. (2010). Institutional investors and corporate social responsibility: Role of Islamic financial institutions. International Review of Business Research Papers, 6(1), 619–630.

    Google Scholar 

  • Unerman, J. (2000). Methodological issues: Reflections on quantification in corporate social report content analysis. Accounting, Auditing and Accountability Journal, 13(5), 667–680.

    Article  Google Scholar 

  • Ward, I. (2000). Islamic finance in the global economy. Edinburgh: Edinburgh University Press.

    Book  Google Scholar 

  • Williams, G., & Zinkin, J. (2010). Islam and CSR: A study of the compatibility between the tenets of Islam and the UN global compact. Journal of Business Ethics, 9(4), 519–533.

    Article  Google Scholar 

  • Wilson, R. (2009). The development of Islamic finance in the GCC, Working Paper, Kuwait Programme on Development, Governance and Globalisation in the Gulf States. The Centre for the Study of Global Governance, London School of Economics.

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Zakaria Ali Aribi.

Appendix 1

Appendix 1

Themes and sub-themes of CSR

Category/themes Sub-themes
Shari’ah compliance Compliance with Shari’ah in all products and services
Nature of unlawful transactions (if any)
Reasons for undertaking such transactions
Shari’ah Board’s view on the amount of revenue or expenses from these transactions
How the bank disposes of such revenue
Zakah Source of Zakah
Amount of Zakah
Beneficiary
Balance of Zakah
Reasons for non-distribution
Charity and donation The nature of charitable social activities
The amount spent on these activities
The sources of funds
Qard al-hasan Source of funds allocated to Qard al-hasan by bank
Source of funds allocated to Qarad al-hasan by donation
The amounts given to beneficiaries
The social purpose for which the funds were given
Debtors The policy in dealing with insolvent clients/debtors
The amount charged as late penalty
The Shari’ah Board’s opinion
Environment Environmental policy
Lending policy
Conservation of natural resources
Employee The policy on wages and other remuneration
The policy on education and training
The policy on equal opportunities

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Ali Aribi, Z., Arun, T. Corporate Social Responsibility and Islamic Financial Institutions (IFIs): Management Perceptions from IFIs in Bahrain. J Bus Ethics 129, 785–794 (2015). https://doi.org/10.1007/s10551-014-2132-9

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-014-2132-9

Keywords

  • Islamic finance
  • Management perceptions
  • Corporate social responsibility
  • Bahrain