Stakeholders` perceptions of Islamic social reporting by Islamic banks : Malaysian evidence

Abstract

Islamic banks are one of the most important Islamic institutions. In theory, Islamic banks are also unique institutions, as they should not only focus on economic matters but also should focus on their social roles to their society. Islamic social reporting emerges as an alternative to fill this gap. Islamic social reporting is the process of identifying, providing, and communicating social and other relevant information in conformity with the spiritual need of Muslims decision makers in order to demonstrate accountability to God and community; to increase transparency of business activities toward Muslim Ummah; and to achieve MarÌÉtillah (blessing from Allah). This study investigates the stakeholders' perceptions of Islamic social reporting by Islamic banks in Malaysia since this country is at the forefront on the development of Islamic banking and finance. This study specifically examines the stakeholders' perceptions on several issues of Islamic social reporting such as: (a) the objectives of Islamic social reporting; (b) the factors that inhibit Islamic banks in disclosing Islamic social reporting; (c) the motivations of Islamic banks to disclose Islamic social reporting; and (d) the information that might be useful for the stakeholders and society. The study examines the perceptions of selected stakeholders such as Islamic banks' accountants, members of SharīÑah Supervisory Board (SSB), Muslim accounting academicians, and customers that are proxies by postgraduate students. This study adopts the questionnaire survey method to examine the perceptions of stakeholders. The statistical analysis, both parametric and non-parametric, was used to measure the difference perceptions on several issues of Islamic social reporting. The study found that the stakeholders of Islamic banks in Malaysia have positive views on Islamic social reporting. Secondly, the stakeholders perceived that the spiritual and the social responsibility motivations have motivated Islamic banks to disclose Islamic social reporting. Thirdly, the stakeholders perceived that the regulation and the stakeholders’ awareness have dominated the factors that inhibited Islamic banks from disclosing Islamic social reporting. Finally, this study may contribute to the improvement of Islamic banking financial and social reports and will improve the awareness of the regulators and the management of Islamic banks in Malaysia as well as other countries.