Social reporting by islamic banks

TLDR

Islamic banking has expanded rapidly over the past three decades, offering Sharia‑compliant financial products that emphasize social responsibility. The study aims to create a benchmark set of social disclosure standards tailored to Islamic banks. Using a disclosure‑index approach, the authors compare the benchmark to the actual social disclosures of 29 Islamic banks across 16 countries and conduct a content analysis of disclosure volume. The analysis reveals that Islamic banks’ social reporting is markedly below expectations, with Zakah‑paying banks providing more disclosures than those not subject to the religious tax.

Abstract

The last thirty years have witnessed the appearance and rapid expansion of Islamic banking both inside and outside the Islamic world. Islamic banks provide financial products that do not violate Sharia , the Islamic law of human conduct. The Islamic principles upon which the banks claim to operate give an important role to social issues. Applying these principles, we develop a benchmark set of social disclosures appropriate to Islamic banks. These are then compared, using a disclosure index approach, the actual social disclosures contained in the annual reports of twenty‐nine Islamic banks (located in sixteen countries) to this benchmark. In addition, content analysis is undertaken to measure the volume of social disclosures. Our analysis suggests that social reporting by Islamic banks falls significantly short of our expectations. The results of the analysis also suggest that banks required to pay the Islamic religious tax Zakah provide more social disclosures than banks not subject to Zakah .