Sharia Disclosure Practices: A Comparison of Islamic Banks in Indonesia and Malaysia
DOI:
https://doi.org/10.21580/economica.2021.12.2.7435Keywords:
Sharia Reporting, Comparative Islamic Finance, Corporate Governance in Sharia Banks, Indonesia and Malaysia Financial Institutions, Compliance Disclosure IndexAbstract
The growth of Islamic banking, particularly in Indonesia and Malaysia, has resulted in an increase in assets and disbursement in the two developing countries. This provides an opportunity as well as challenges in implementing good governance to maintain compliance with sharia principles. Involving data from Islamic banks in Indonesia and Malaysia from 2016 to 2018, this study aims to measure the Sharia disclosure level with seven indicators developed from previous research. The results demonstrate that Islamic banks in both countries did not meet the full Sharia disclosure requirement, as evidenced by an index of less than one, namely 0.76 for Islamic banks in Indonesia and 0.57 for Islamic banks in Malaysia. The findings of this study are expected to contribute to the improvement of the management of Islamic banks in both countries, to provide more comprehensive sharia disclosure in their annual report.
Downloads
References
Abbas, S. Z. M., Sulaiman, S., & Bakar, N. A. (2018). A review on zakat payments by Islamic banks in Malaysia. International Journal of Zakat, 3(4), 71-82. https://doi.org/10.37706/ijaz.v3i4.107
Abdullah, W. A. W., Majella, P., & Jenny, S. (2013). Shari’ah disclosures in Malaysian and Indonesian Islamic banks:The Shari’ah governance system. Journal of Islamic Accounting and Business Research, 4(2), 100–131. https://doi.org/10.1108/JIABR-10-2012-0063
Aribi, A. Z., Arun, T., & Gao, S. (2015). Accountability in Islamic Financial institution: the role of the Shari’ah Supervisory Board Reports. Journal of Islamic Accounting and Business Research. https://doi.org/https://doi.org/10.1108/ JIABR-10-2015-0049
Darmadi, S. (2013). Corporate governance disclosure in the annual report: An exploratory study on Indonesian Islamic banks. Humanomics, 29(1), 4–23. https://doi.org/10.1108/08288661311299295
Darus, F., Yusoff, H., Naim, D. M. A., Amran, A., & Fauzi, H. (2018). Corporate social responsibility practices of Malaysian Islamic banks from the Shariah perspective: A focus on the key dimensions. Global Journal Al-Thaqafah, 2018(Special Issue), 41–55. https://doi.org/10.7187/gjatsi2018-03
Elgattani, T., & Hussainey, K. (2020). The determinants of AAOIFI governance disclosure in Islamic banks. Journal of Financial Reporting and Accounting, 18(1), 1–18. https://doi.org/10.1108/JFRA-03-2019-0040
Grassa, R., El-Halaby, S., & Hussainey, K. (2019). Chapter 13 Corporate Governance and Multi-corporate Disclosures Evidence from Islamic Banks. Research in Corporate and Shari’ah Governance in the Muslim World: Theory and Practice , 167–187. https://doi.org/10.1108/978-1-78973-007-420191014
Hanefah, M. M., Kamaruddin, M. I. H., Salleh, S., Shafii, Z., & Zakaria, N. (2020). Internal control, risk and Sharīʿah non-compliant income in Islamic financial institutions. ISRA International Journal of Islamic Finance, 12(3), 401–417. https://doi.org/10.1108/IJIF-02-2019-0025
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. https://doi.org/10.1007/s10551-006-9272-5
Harun, M. S., Hussainey, K., Mohd Kharuddin, K. A., & Farooque, O. Al. (2020). CSR Disclosure, Corporate Governance and Firm Value: a study on GCC Islamic Banks. International Journal of Accounting and Information Management, 28(4), 607–638. https://doi.org/10.1108/IJAIM-08-2019-0103
Imamia, T. L., Noor, I., & Manzilati, A. (2019). The Disclosure of Islamic Ethics in Islamic Banks. WACANA, Journal of the Humanities of Indonesia, 22(1), 42–46.
Ismail, M., Jan, S., & Ullah, K. (2020). Assessing Shariah Disclosure in Pakistan: The Case of Islamic Banks. Business & Economic Review, 12(2), 1–18. https://doi.org/10.22547/ber/12.2.1
Kasim, N. A. A. (2012). Disclosure of Shariah compliance by Malaysian takaful companies. Journal of Islamic Accounting and Business Research, 3(1), 20–38. https://doi.org/10.1108/17590811211216041
Khansa, F. N., & Violita, E. S. (2021). The association between islamic bank perfomance and islamic social responsibility in supporting SDGs: The different between Indonesia and Malaysia. IOP Conference Series: Earth and Environmental Science, 716(1), 1–12. https://doi.org/10.1088/1755-1315/716/1/012062
Maali, B., Casson, P., & Napier, C. (2006). Social reporting by islamic banks | ReadCube Articles. Abacus, 42(2), 266–289. https://doi.org/10.1111/j.1468-4497.2006.00200.x
Mnif, Y., & Tahari, M. (2020). Corporate governance and compliance with AAOIFI governance standards by Islamic banks. International Journal of Islamic and Middle Eastern Finance and Management, 13(5), 891–918. https://doi.org/10.1108/IMEFM-03-2019-0123
Ariffin, N., Abdul Hamid, F., & Md Amin, N. A. (2021). Shariah Disclosure Practices in Malaysian Islamic Banks using the Shariah Disclosure Index. International Journal of Islamic Economics and Finance (IJIEF), 4(SI), 63–86. https://doi.org/10.18196/ijief.v4i0.9953
Noordin, N. H., & Kassim, S. (2019). Does Shariah committee composition influence Shariah governance disclosure?: Evidence from Malaysian Islamic banks. Journal of Islamic Accounting and Business Research, 10(2), 158–184. https://doi.org/10.1108/JIABR-04-2016-0047
Nor, M. N., & Sawari MD, F. M. (2020). The practice of reporting shariah non-compliant income in the annual financial report of Islamic Commercial Banks in Malaysia. Islamiyyat The International Journal of Islamic Studies, 42(1), 93–102.
Puspitasari, L. L., & Handayani, W. (2020). Do the Characteristics of Internal Audits and Compliance Functions Affect Sharia Compliance? Journal of Indonesian Economy and Business, 35(2), 97. https://doi.org/10.22146/jieb.54574
Sadekin, M. S., & Islam, R. M. (2020). Disclosure of Financial Reporting of Islamic Financial Institutes of Bangladesh: A Concept of Relevant Reviews. International Journal of Economics, Business and …, 4(3), 319–339. http://www.jurnal.stie-aas.ac.id/index.php/IJEBAR/article/view/1077
Segarawasesa, F. S. (2021). Analysis of factors affecting sharia compliance levels in sharia banks in Indonesia. Asian Journal of Islamic Management (AJIM), 3(1), 56–66. https://doi.org/10.20885/ajim.vol3.iss1.art6
Sencal, H., & Asutay, M. (2021). Ethical disclosure in the Shari’ah annual reports of Islamic banks: discourse on Shari’ah governance, quantitative empirics and qualitative analysis. Corporate Governance (Bingley), 21(1), 175–211. https://doi.org/10.1108/CG-01-2020-0037
Vinnicombe, T. (2010). AAOIFI reporting standards: Measuring compliance. Advances in Accounting, 26(1), 55–65. https://doi.org/10.1016/j.adiac.2010.02.009
Downloads
Published
Issue
Section
License
Authors who publish with this journal agree to the following terms:
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
Authors can enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), acknowledging its initial publication in this journal.
Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) before and during the submission process, as it can lead to productive exchanges and earlier and greater citation of published work (See The Effect of Open Access).
