Whether Shari’ah compliance efficiency is a matter for the financial performance: The case of Islami Bank Bangladesh Limited

Hafij Ullah, Ruma Khanam

Research output: Contribution to journalArticle

Abstract

Purpose – Shari’ah is the foundation of Islamic banks. Although all the Islamic banks required complying with the Shari’ah requirements 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 whether Shari’ah compliance 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, but Shari’ah compliance is the dominant instinct of acquiring the leading position. Superior Shari’ah compliance creates internal strengths and external opportunities that facilitate IBBL in achieving higher financial performance. Most interviewees argued that Shari’ah is the only disposition that makes IBBL unique. Moreover, the bank that considerably follows Shari’ah gets better financial outcomes.
Research limitations/implications – The study used a qualitative method using interview responses only for evaluating the relationship between Shari’ah compliance and financial performance. Further study may be conducted based on a quantitative approach.
Practical implications – This paper expects to uphold the significance of Shari’ah in improving the financial performance of IBBL and simultaneously motivating the parties associated with the Islamic banks in enhancing the level of Shari’ah compliance. 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 of Shari’ah compliance in creating avenues for greater financial performance and develops a model showing the ways how Shari’ah compliance leads Islamic banks to achieve higher financial positions.
Keywords Bangladesh, Shari’ah compliance, Financial performance, IBBL, Islamic bank
Original languageEnglish
Pages (from-to)183-200
Number of pages18
JournalJournal of Islamic Accounting and Business Research
Volume9
Issue number2
DOIs
Publication statusPublished - 4 Mar 2018

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Bangladesh
Financial performance
Islamic financial institutions
Electronic mail
Design methodology
Influence factors
Qualitative methods
Key words
Financial analysts
Disposition

Keywords

  • Bangladesh
  • Shari’ah compliance
  • Financial performance
  • IBBL
  • Islamic bank

Cite this

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title = "Whether Shari’ah compliance efficiency is a matter for the financial performance: The case of Islami Bank Bangladesh Limited",
abstract = "Purpose – Shari’ah is the foundation of Islamic banks. Although all the Islamic banks required complying with the Shari’ah requirements 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 whether Shari’ah compliance 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, but Shari’ah compliance is the dominant instinct of acquiring the leading position. Superior Shari’ah compliance creates internal strengths and external opportunities that facilitate IBBL in achieving higher financial performance. Most interviewees argued that Shari’ah is the only disposition that makes IBBL unique. Moreover, the bank that considerably follows Shari’ah gets better financial outcomes.Research limitations/implications – The study used a qualitative method using interview responses only for evaluating the relationship between Shari’ah compliance and financial performance. Further study may be conducted based on a quantitative approach.Practical implications – This paper expects to uphold the significance of Shari’ah in improving the financial performance of IBBL and simultaneously motivating the parties associated with the Islamic banks in enhancing the level of Shari’ah compliance. Moreover, this study provides new insights into the importanceIslamic banks and their performance in relation to the choice of customers.Originality/value – This study explores the significance of Shari’ah compliance in creating avenues for greater financial performance and develops a model showing the ways how Shari’ah compliance leads Islamic banks to achieve higher financial positions.Keywords Bangladesh, Shari’ah compliance, Financial performance, IBBL, Islamic bank",
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T1 - Whether Shari’ah compliance efficiency is a matter for the financial performance

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AU - Ullah, Hafij

AU - Khanam, Ruma

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N2 - Purpose – Shari’ah is the foundation of Islamic banks. Although all the Islamic banks required complying with the Shari’ah requirements 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 whether Shari’ah compliance 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, but Shari’ah compliance is the dominant instinct of acquiring the leading position. Superior Shari’ah compliance creates internal strengths and external opportunities that facilitate IBBL in achieving higher financial performance. Most interviewees argued that Shari’ah is the only disposition that makes IBBL unique. Moreover, the bank that considerably follows Shari’ah gets better financial outcomes.Research limitations/implications – The study used a qualitative method using interview responses only for evaluating the relationship between Shari’ah compliance and financial performance. Further study may be conducted based on a quantitative approach.Practical implications – This paper expects to uphold the significance of Shari’ah in improving the financial performance of IBBL and simultaneously motivating the parties associated with the Islamic banks in enhancing the level of Shari’ah compliance. Moreover, this study provides new insights into the importanceIslamic banks and their performance in relation to the choice of customers.Originality/value – This study explores the significance of Shari’ah compliance in creating avenues for greater financial performance and develops a model showing the ways how Shari’ah compliance leads Islamic banks to achieve higher financial positions.Keywords Bangladesh, Shari’ah compliance, Financial performance, IBBL, Islamic bank

AB - Purpose – Shari’ah is the foundation of Islamic banks. Although all the Islamic banks required complying with the Shari’ah requirements 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 whether Shari’ah compliance 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, but Shari’ah compliance is the dominant instinct of acquiring the leading position. Superior Shari’ah compliance creates internal strengths and external opportunities that facilitate IBBL in achieving higher financial performance. Most interviewees argued that Shari’ah is the only disposition that makes IBBL unique. Moreover, the bank that considerably follows Shari’ah gets better financial outcomes.Research limitations/implications – The study used a qualitative method using interview responses only for evaluating the relationship between Shari’ah compliance and financial performance. Further study may be conducted based on a quantitative approach.Practical implications – This paper expects to uphold the significance of Shari’ah in improving the financial performance of IBBL and simultaneously motivating the parties associated with the Islamic banks in enhancing the level of Shari’ah compliance. Moreover, this study provides new insights into the importanceIslamic banks and their performance in relation to the choice of customers.Originality/value – This study explores the significance of Shari’ah compliance in creating avenues for greater financial performance and develops a model showing the ways how Shari’ah compliance leads Islamic banks to achieve higher financial positions.Keywords Bangladesh, Shari’ah compliance, Financial performance, IBBL, Islamic bank

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KW - Shari’ah compliance

KW - Financial performance

KW - IBBL

KW - Islamic bank

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DO - 10.1108/JIABR-01-2016-0001

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VL - 9

SP - 183

EP - 200

JO - Journal of Islamic Accounting and Business Research

JF - Journal of Islamic Accounting and Business Research

IS - 2

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