An investigation of the disclosure of corporate social responsibility in UK Islamic banks

Nov 01, 2017


Published in: Academy of Accounting and Financial Studies Journal

Publisher: Allied Business Academies, London

/ Adel Ahmed

The adverse consequence of the on-going financial crisis has ignited interest into the relationship and lack of communication between ethics and banking. However, already on the ethical banking horizon, the Islamic banking model (in theory) is in itself built upon the objective of pursing the benefit of society; rather than to solely profit maximise. However, Islamic banking is not free of its own critics. There are claims that the industry has ‘mimicked’ the conventional model; while marginalising their societal role. In addition, a few studies focused on Corporate Social Responsibility (CSR) disclosure practice of Islamic banks. The consensus has been that Islamic banks make minimal disclosure of CSR issues. Nevertheless, this is puzzling as Islamic banks are expected to fulfil their Social accountability and full disclosure expectations; as per the Sharia Law (Islamic law). Furthermore, rather than solely pursue profit maximisation, Islamic banks are expected to apply a moral filter when financing and investing, as well as fulfilling their role of distributing and allocating investments. This helps Islamic banks achieve their objectives; social betterment and justice. These objectives are derived from the Islamic economic paradigm, which interlinks vital Islamic concepts of unity, justice, equity, trusteeship, accountability and benevolence. This Study used content analysis methodology to achieve the objective of the study to compare the communicated versus the expected CSR disclosure made by four UK Islamic banks. The study used the disclosure index developed by Haniffa and Hudaib (2007) for Islamic banks, as the expected disclosure benchmark. The results found that communicated disclosure made by the Islamic banks fell short of the expected or ideal disclosure set out by the benchmark. The overall the result shows the trend of poor disclosure among Islamic banks in Muslim countries (where most studies were focused) is supported by UK Islamic banks, leaving the status quo of poor disclosure unchallenged. The result is surprising since the Islamic banks are expected to be socially accountable. Therefore, make full disclosures in order to fulfil the accountability placed onto them by God (primarily) and thus also mankind (stakeholders). Keywords: Islamic Banking, Islamic Corporate Social Responsibility Disclosure (Icsrd), Uk Islamic Banks, Content Analysis

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