Shari’ah compliance in Islamic banking: An empirical study on selected Islamic banks in Bangladesh

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10 Citations (Scopus)

Abstract

Purpose – The purpose of this paper is to evaluate the Shari’ah compliance status of the Islamic banks in Bangladesh.
Design/methodology/approach – The research was based on both primary and secondary materials. The primary data were gathered through sample questionnaire survey and personal interviews by the researcher; the secondary data were obtained from Qur’an, Hadiths, different circulars/letters, manuals, research books and journals, annual reports, Web sites of the sample banks.
Statistical tools and techniques like weighted average, percentage, SD, variance and correlation between Shari’ah violation score and bank-specific attributes were used applying statistical software Statistical Package for Social Science (version 17.0).
Findings – Shari’ah compliance status of the Islamic banks in Bangladesh is in a vulnerable condition, Shari’ah compliance status highly varies among the Islamic banks, and Shari’ah violation is high in investing activities because of lack of knowledge, lack of sincerity in complying Shari’ah, poor attention in Shari’ah audit and Shari’ah research and lack of strong Shari’ah supervisory board comprising full-time skillful members.
Practical implications – Among others, the major policy implications of this study are as follows: regulatory bodies and Shari’ah board members are expected to have guidelines from this study to find their limitations and to determine their future responsibilities; executives and Employees are expected to get the idea of present state of Shari’ah compliance and to identify their weaknesses in this regard; clients and other stakeholders are expected to have guidelines to choose the better Islamic banks to perform banking transactions; and the researchers in Islamic banking may usefully use the issues raised in this article for more comprehensive studies in Islamic banking and Shari’ah compliance.
Originality/value – The paper opens a new avenue in justifying the status of Shari’ah compliance with a new dataset and correlating Shari’ah violation score with bank-specific attributes.
Original languageEnglish
Pages (from-to)182-199
Number of pages18
JournalInternational Journal of Islamic and Middle Eastern Finance and Management
Volume7
Issue number2
DOIs
Publication statusPublished - 15 Mar 2014

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Islamic banking
Bangladesh
Islamic financial institutions
Empirical study
Violations
Web sites
Employees
Supervisory board
Design methodology
Stakeholders
Investing
Policy implications
Social sciences
Annual reports
Secondary data
Software
Banking
Responsibility
Audit
Questionnaire survey

Keywords

  • Bangladesh
  • Islamic Banking
  • Shariah compliance
  • Shariah violation

Cite this

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title = "Shari’ah compliance in Islamic banking: An empirical study on selected Islamic banks in Bangladesh",
abstract = "Purpose – The purpose of this paper is to evaluate the Shari’ah compliance status of the Islamic banks in Bangladesh.Design/methodology/approach – The research was based on both primary and secondary materials. The primary data were gathered through sample questionnaire survey and personal interviews by the researcher; the secondary data were obtained from Qur’an, Hadiths, different circulars/letters, manuals, research books and journals, annual reports, Web sites of the sample banks.Statistical tools and techniques like weighted average, percentage, SD, variance and correlation between Shari’ah violation score and bank-specific attributes were used applying statistical software Statistical Package for Social Science (version 17.0).Findings – Shari’ah compliance status of the Islamic banks in Bangladesh is in a vulnerable condition, Shari’ah compliance status highly varies among the Islamic banks, and Shari’ah violation is high in investing activities because of lack of knowledge, lack of sincerity in complying Shari’ah, poor attention in Shari’ah audit and Shari’ah research and lack of strong Shari’ah supervisory board comprising full-time skillful members.Practical implications – Among others, the major policy implications of this study are as follows: regulatory bodies and Shari’ah board members are expected to have guidelines from this study to find their limitations and to determine their future responsibilities; executives and Employees are expected to get the idea of present state of Shari’ah compliance and to identify their weaknesses in this regard; clients and other stakeholders are expected to have guidelines to choose the better Islamic banks to perform banking transactions; and the researchers in Islamic banking may usefully use the issues raised in this article for more comprehensive studies in Islamic banking and Shari’ah compliance.Originality/value – The paper opens a new avenue in justifying the status of Shari’ah compliance with a new dataset and correlating Shari’ah violation score with bank-specific attributes.",
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