Maintaining Employees’ Morality to Improve Internal Control in the Sharia Microfinance Institution

Hasan Mukhibad*  -  Universitas Negeri Semarang, Indonesia

(*) Corresponding Author
DOI: 10.21580/ws.25.2.1924

Problems of fraud committed by a company’s internal party are hitherto still problematic to figure out, including in sharia microfinance institutions. This research examines the benefit of maintaining employees’ morality for the improvement of internal control in sharia microfinance institutions. The object of this research is Anda BMT (sharia microfinance institution in Indonesia). The research uses a qualitative method. The data were obtained by interviewing the managers and twenty employees, and also through field observations for four months. The result of this research shows that the management needs to improve the employees’ morality as it is the key element to prevent fraud act. The efforts made to improve the employees’ morality are like praying together, joining a program of Islamic study once a week, and targeting all employees to read the Quran at least One Day One Juz (ODOJ). Islamic religious activities should be applied to sharia financial institutions in order to improve the employees’ morality and to diminish the act of fraud. It is because the employees who properly carry out Islamic religious activities may reduce the potency of fraud.

Keywords: employees’ morality; internal control; Islamic religious activities; sharia microfinance institution

  1. Abdul Rahman, Rashidah, and Faisal Dean. 2013. “Challenges and Solutions in Islamic Microfinance.” Humanomics 29 (4): 293–306. doi:10.1108/H-06-2012-0013.
  2. Abdullahi, Rabi ’u, and Noorhayati Mansor. 2015. “Fraud Triangle Theory and Fraud Diamond Theory. Understanding the Convergent and Divergent For Future Research.” International Journal of Academic Research in Accounting Finance and Management Sciences 5 (4): 38–45. doi:10.6007/IJARAFMS/v5-3/1823.
  3. Ahmad, Imad-ad-dean. 2004. “Islam, Commerce, and Business Ethics.” In Plenary Address at the Loyola Institute for Ethics and Spirituality in Business – International Ecumenical Conference, 1–14.
  4. Alaeddin, Omar, and Nurhayati Anwar. 2012. “Critical Analysis of Diverse Funding of Islamic Microfinance Institution: A Case Study in BMT Amanah Ummah Surabaya Indonesia.” In 2nd ISRA Colloquium 2012 - Islamic Finance in a Challenging Economy: Moving Forward, 2–33.
  5. Ali, Abbas J. 1992. “The Islamic Work Ethic in Arabia.” The Journal of Psychology 126 (5). Taylor & Francis: 507–19.
  6. Ali, Abbas J, and Ali Al-Kazemi. 2005. “The Kuwaiti Manager: Work Values and Orientations.” Journal of Business Ethics 60 (1). Springer: 63–73.
  7. Ali, Abbas J, and Abdullah Al-Owaihan. 2008. “Islamic Work Ethic: A Critical Review.” Cross-Cultural Management: An International Journal 15 (1). Emerald Group Publishing Limited: 5–19.
  8. Amaliah, Ima, Tasya Aspiranti, and Pupung Purnamasari. 2015. “The Impact of the Values of Islamic Religiosity to Islamic Job Satisfaction in Tasikmalaya West Java, Indonesia, Industrial Centre.” In 2nd Global Conference on Business and Social Science-2015, 211:984–91. Elsevier B.V. doi:10.1016/j.sbspro.2015.11.131.
  9. Beekun, Rafik Issa. 1997. Islamic Business Ethics. International Institute of Islamic Thought (IIIT).
  10. Berg, Robert L, and Joseph S Cassells. 1992. “Falls in Older Persons: Risk Factors and Prevention.” NCBI. National Academies Press (US).
  11. Biggerstaff, Lee, David C. Cicero, and Andy Puckett. 2015. “Suspect CEOs, Unethical Culture, and Corporate Misbehavior.” Journal of Financial Economics 117 (1). Elsevier: 98–121. doi:10.1016/j.jfineco.2014.12.001.
  12. Bologna, Jack, and Robert J Lindquist. 1995. Fraud Auditing and Forensic Accounting: New Tools and Techniques. 2nd ed. John Wiley & Sons Inc.
  13. Chapra, Umer, and Habib Ahmed. 2002. Corporate Governance In Islamic Financial Institutions. Islamic Development Bank - Islamic Research and Training Institute. Islamic Development Bank.
  14. Cohn, Alain, Ernst Fehr, and Michel André Maréchal. 2014. “Business Culture and Dishonesty in the Banking Industry.” Nature 516 (7529). Nature Research: 86–89.
  15. Creswell, John. W. 2009. Research Design – Qualitative, Quantitative, and Mixed Methods Approach. London: Sage Publication.
  16. Daniel, C, and Al-Muharrami Saeed. 2013. “Cooperative and Islamic Banks; What Can They Learn from Each Other?” IMF Working Papers 13 (84): 1–31.
  17. Dineshkumar, Sabina, and Priya Kogulacumar. 2011. “Internal Control System and Its Impact on the Performance of the Sri Lanka Telecom Limited in Jaffna District.” Faculty of Management Studies & Commerce, University of Jaffna, Sri Lanka, ISSN, 2319–7900.
  18. Dorminey, Jack, A Scott Fleming, Mary-Jo Kranacher, and Richard A Riley Jr. 2012. “The Evolution of Fraud Theory.” Issues in Accounting Education 27 (2). American Accounting Association: 555–79.
  19. Doyle, Jeffrey T, Weili Ge, and Sarah McVay. 2007. “Accruals Quality and Internal Control Over Financial Reporting.” The Accounting Review 82 (5): 1141–70.
  20. Ge, Weili, and Sarah McVay. 2005. “The Disclosure of Material Weaknesses in Internal Control after the Sarbanes-Oxley Act.” Accounting Horizons 19 (3): 137–58.
  21. Goetsch, David L, and Stanley B. Davis. 2014. Quality Management for Organizational Excellence. pearson Upper Saddle River, NJ.
  22. Grullon, Gustavo, George Kanatas, and James Weston. 2009. “Religion, Ethics, and Corporate Behavior.”
  23. Hadisi, Mitra. 2014. “The Effect of Islamic Work Ethics On The Performance Of Muslim Employees Of Marketing Sector In Multinational.” International Journal of Organizational Leadership 3: 31–40.
  24. Hall, James A. 2004. “Ethics, Fraud, and Internal Control.” In Accounting Information Systems, 4th ed., 1–7. Brisbane: South-Western Publishing Co.
  25. Hanim Fadzil, Faudziah, Hasnah Haron, and Muhamad Jantan. 2005. “Internal Auditing Practices and Internal Control System.” Managerial Auditing Journal 20 (8). Emerald Group Publishing Limited: 844–66.
  26. Hashim, Muhammad. 2012. “Islamic Perception of Business Ethics and the Impact of Secular Thoughts on Islamic Business Ethics.” International Journal of Academic Research in Business and Social Sciences 2 (3): 98–120.
  27. Hejase, Hussin Jose, Bassam Hamdar, and Mohammad Raslan. 2014. “Business Ethics And Religion In The Financial Business Sector : Case Of Syiria.” Journal of Business & Management 1 (2): 73–113.
  28. Karim, Nimrah, Michael Tarazi, and Xavier Reille. 2008. “Islamic Microfinance : An Emerging Market Niche.” Focus Note. doi:10.1355/SJ23-1D.
  29. Khan, Khurram, Muhammad Abbas, Asma Gul, and Usman Raja. 2015. “Organizational Justice and Job Outcomes: Moderating Role of Islamic Work Ethic.” Journal of Business Ethics 126 (2). Springer: 235–46.
  30. Krummeck, Steve. 2000. “The Role of Ethics in Fraud Prevention: A Practitioner’s Perspective.” Business Ethics: A European Review 9 (4). Wiley Online Library: 268–72.
  31. Kustin, Bridget. 2015. “Islamic (Micro) Finance: Culture, Context, Promise, Challenges.” Financial Services for the Poor. Bangladesh: Bill & Melinda Gates Foundation.
  32. Liyanarachchi, Gregory A. 2009. “Accounting In Ancient Sri Lanka: Some Evidence Of The Accounting And Auditing Practices Of Buddhist Monasteries During 815—1017 AD.” Accounting History 14 (1–2). SAGE Publications Sage UK: London, England: 101–20.
  33. Manan, Siti Khadijah Ab, and Muhammad Hakimi Bin Mohd Shafiai. 2015. “Risk Management of Islamic Microfinance (IMF) Product by Financial Institutions in Malaysia.” Procedia Economics and Finance 31 (15). Elsevier B.V.: 83–90. doi:10.1016/S2212-5671(15)01134-X.
  34. Mccullough, Michael E, and Brian L B Willoughby. 2009. “Religion, Self-Regulation, and Self-Control : Associations, Explanations, and Implications.” Psychological Bulletin 135 (1): 69–93. doi:10.1037/a0014213.
  35. Merdeka, Suara. 2011. “Dugaan Pembobolan Dana Nasabah: Giliran Bank Jateng Syariah Diaudit.” Suara Merdeka Newspaper, November.
  36. Merriam, Sharan B. 2009. Qualitative Research: A Guide to Design and Implementation. Vol. 53. San Fransisco: The Jossey-Bass. doi:10.1017/CBO9781107415324.004.
  37. Mukhibad, Hasan. 2014. “Dampak Pendidikan Etika Bisnis Dan Pendidikan Ekonomi Syariah Terhadap Etika Bisnis.” Jurnal Dinamika Akuntansi 6 (2): 119–32.
  38. Muraleetharan, P. 2011. “Internal Control and Impact of Financial Performance of the Organizations (Special Reference Public and Private Organizations in Jaffna District).” In Intemational Conference on Business & Information [C/OL].
  39. Nasution, Mustafa Edwin. 2009. “Islamic Spirit and Morale in Economics.” Journal of International Development and Cooperation 15 (1–2): 113–24.
  40. Njeri, C K. 2014. “Effect of Internal Controls on the Financial Performance of Manufacturing Firms in Kenya.” Unpublished Thesis.
  41. Nor, Wan, Iffah Wan, Mohd Fathi, and Evita Puspitasari. 2017. “Potential Employee Fraud Scape in Islamic Banks : The Fraud Triangle Perspective.” Global Journal Al-Thaqafah 7 (2): 79–94.
  42. Puspasari, Novita. 2012. “Pengaruh Moralitas Individu dan Pengendalian Internal Terhadap Kecenderungan Kecurangan Akuntansi: Studi Eksperimen pada Konteks Pemerintahan Daerah.” Universitas Gadjah Mada.
  43. Rahman, Rashidah Abdul, and Irda Syahira Khair Anwar. 2014. “Effectiveness of Fraud Prevention and Detection Techniques in Malaysian Islamic Banks.” Procedia - Social and Behavioral Sciences 145. Elsevier B.V.: 97–102. doi:10.1016/j.sbspro.2014.06.015.
  44. Ramamoorti, Sridhar. 2008. “The Psychology and Sociology of Fraud: Integrating the Behavioral Sciences Component into Fraud and Forensic Accounting Curricula.” Issues in Accounting Education 23 (4): 521–33.
  45. Rokhman, Wahibur. 2010. “The Effect of Islamic Work Ethics on Work Outcomes.” EJBO-Electronic Journal of Business Ethics and Organization Studies 15 (1). Business and Organization Ethics Network (BON): 21–28.
  46. Saiful, Ahmad, Azlin Puteh, Norlela Kamaluddin, Siti Khadijah, and Abdul Manan. 2011. “Unstoppable Fraud, Scandals and Manipulation – An Urgent Call for an Islamic-Based Code of Ethics.” In International Conference on Sociality and Economics Development, 10:474–78.
  47. Sakti, Ali. 2013. “Mapping of Conditions and Potential of BMT: Partnership to Expand the Market and Linkage of Islamic Banking Services to the Micro Enterprises.” Al-Muzara’ah I (1): 1–18.
  48. Salin, Ahmad Saiful Azlin Puteh; Ab Manan, Siti Khadijah; Nawawi, Anuar. 2017. “The Role of Islamic Ethics to Prevent Corporate Fraud.” International Journal of Business and Society 18 (September): 113–28.
  49. Sarosa, Samiaji. 2012. Qualitative Research Principles. Jakarta: Indeks.
  50. Suprapto, Hadi. 2011. “Pembobolan Bank Kian Marak.” Vivanews.Com.
  51. Syed, Jawad, and Abbas J Ali. 2010. “Principles of Employment Relations in Islam: A Normative View.” Employee Relations 32 (5). Emerald Group Publishing Limited: 454–69.
  52. Triyuwono, Iwan. 2004. “Amanah), the Divine Symbol: Interpretations in the Context of Islamic Banking and Accounting Practices.” In Fourth Asia Pacific Interdisciplinary Research in Accounting Conference, 1–20.
  53. Tuanakotta, Theodorus M. 2007. Akuntansi Forensik Dan Audit Investigatif. Jakarta: Lembaga Penerbit Fakultas Ekonomi Universitas Indonesia.
  54. Viva, Tim. 2011. “Pembobolan Marak, Bank Syariah Lebih Aman?” Vivanews.Com.
  55. Wisker, Zazli Lily, and Vikinta Rosinaite. 2016. “The Effect of Religiosity and Personality on Work Ethics : A Case of Muslim Managers.” Science Journal Of Business And Management 4 (1999): 1–9. doi:10.11648/j.sjbm.s.2016040101.11.
  56. Yin, Robert K. 2011. Qualitative Research from Start to Finish. New York: The Guilford Press.
  57. Zahrah, Novia, Siti Norasyikin, Binti Abdul, Shamsul Huda Binti, Abdul Rani, Bidayatul Akmal, and Binti Mustafa. 2016. “The Relationship between Islamic Religiosity, Islamic Work Ethics and Job Performance.” In The European Proceedings of Social & Behavioural Sciences, 710–16.

Open Access Copyright (c) 2017 Hasan Mukhibad
Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Publisher:
Institute for Research and Community Services (LP2M)
Universitas Islam Negeri Walisongo Semarang, Rectorate Building, 3rd Floor
Jl. Prof. Hamka - Kampus 3, Tambakaji Ngaliyan 50185, Semarang, Central Java, Indonesia
Email: walisongo@walisongo.ac.id

 

 
Creative Commons License
This work is licensed under a 
Creative Commons Attribution-ShareAlike 4.0 International License 

View My Stats

 

apps