The disclosure practices on Maqasid Shariah objectives among Malaysian Islamic banks using fuzzy Topsis assessment
DOI:
https://doi.org/10.24200/jonus.vol8iss3pp109-133Abstract
Background and Purpose: The Maqasid Shariah ratio is operationalized based on Maqasid Shariah objectives. Shariah fraternity, such as scholars, investors, and customers, still assesses how the business, specifically the financial institutions, delivers Maqasid Shariah's objectives according to their business goals. Thus, this becomes a genuine concern for society, especially for users of financial information and shariah financing or investing customers, depositors, or borrowers. Therefore, this study intends to examine Islamic banks' application level of Maqasid Shariah objectives using their financial reporting data.
Methodology: The Maqasid Shariah ratio is measured based on the two objectives of Maqasid Shariah, namely Justice (Al-Adl) and Welfare (Al-Maslahah). The determinants of the Maqasid Shariah ratio as a performance score for the Shariah scale of Islamic banks are assessed using the sophisticated Fuzzy TOPSIS technique.
Findings: Malaysian Islamic banks' achievement is based on the Shariah objectives, specifically on Justice (Al-Adl) at 84.51% and Welfare (Al-Maslahah) at 67.53%. However, the top score for Malaysian Islamic banks could achieve an above-average level of 44.1% out of 70% on the overall average score on Maqasid Shariah's objectives application in their reporting practice.
Contributions: The results help improve and understand the application levels of Maqasid Shariah’s objectives and the disclosure practice of Maqasid Shariah's financial reporting for Islamic banks in Malaysia. Islamic banks need full disclosure and specific standards or provisions for reporting the Maqasid Shariah elements. This is needed to assist the users and provide insights into making the right decision, especially in Shariah-compliant investment products, financing alternatives, or services.
Keywords: Maqasid Shariah, Islamic banks, disclosure, maslahah, fuzzy TOPSIS.
References
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Abdullah, D. V., & Chee K. (2013). Islamic finance: Why it makes sense (for you) ― Understanding its principles and practices. Marshall Cavendish Business.
Abdullah, M., Shahimi, S., & Ismail, A. G. (2011). Operational risk in Islamic banks: Examination of issues. Qualitative Research in Financial Markets, 3(2), 131–151.
Ahmad, Z., & Ismail, A. G. (2017). Full reserve system and the Maqasid Shariah. Journal of Emerging Economies and Islamic Research, 5(2), 58-66.
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goals#:~:text=If%20Islamic%20banks%20rely%20on,equity%2Dbased%20products%20and%20services.
Al-Jarhi, M. A. (2016). An economic theory of Islamic finance. ISRA International Journal of Islamic Finance, 9(2), 117–132.
Alzoubi, T. (2017). Profitability of Islamic financing tools. Banking and Finance Review, 9(1), 75–84.
Asutay, M., & Harningtyas, A. F. (2015). Developing Maqasid al-Shari'ah index to evaluate social performance of Islamic banks: A conceptual and empirical attempt. International Journal of Islamic Economics and Finance Studies, 1(1), 5–64.
Auda, J. (2008). Maqasid Al-Shariah an introductory guide. The International Institute of Islamic Thought.
Bank Negara Malaysia. (2016). Financial reporting for Islamic banking institutions. Central Bank of Malaysia.
Benitez, J. M., Martin, J. C., & Roman, C. (2007). Using fuzzy numbers for measuring the quality of service in the hotel industry. Tourism Management, 28(1), 544–555.
Dusuki, A. W. (2009). Challenges of realising Maqasid al-Shariah (objectives of Shariah) in Islamic capital market: Special focus on equity-based sukuk. In USM-ISDEV International Islamic Management Conference on Islamic Capital Market (pp. 1–
30). USM Pulau Pinang, Malaysia.
Farook, S. (2008). Social responsibility for Islamic financial institutions: Laying down a framework. Journal of Islamic Economics, Banking and Finance, 4(1), 61–82.
Fox, W. P., & Everton, S. F. (2014). Using mathematical models in decision making methodologies to find key nodes in the Noordin Dark network. American Journal of Operations Research, 04(04), 255–267.
Haniffa, R. (2002). Social reporting disclosure – An Islamic perspective. Indonesian Management & Accounting Research, 1(2), 128-146
Ibrahim, S. H. M., & Yaya, R. (2005). The emerging issues on the objectives and characteristics of Islamic accounting for Islamic business organisations. Malaysian Accounting Review, 4(1), 75–92.
Ismail, A. G., & Che Arshad, N. (2010). Financial ratio and Maqasid Shariah in evaluating the performance of microfinance institutions. (Unpublished working paper in Islamic economics and finance No. 1020). Universiti Kebangsaan Malaysia.
Kahraman, C. (2006). Fuzzy applications in industrial engineering. Springer.
Khoiriyah, V. N., & Salman, K. R. (2020). The effect of the Maqashid Shariah index, company size, and company age on Islamic social reporting. Muqtasid: Jurnal Ekonomi dan Perbankan Syariah, 11(2), 117–132.
Laldin, M. A., & Furqani, H. (2013). Developing Islamic finance in the framework of Maqasid al-Shari'ah: Understanding the ends (Maqasid) and the means (Wasa'il). International Journal of Islamic and Middle Eastern Finance and Management, 6(4),
278–289.
Mahyudin, W. A., & Rosman, R. (2020). Value-based intermediation and realisation of Maqasid Al-Shariah: Issues and challenges for Islamic banks in Malaysia. Advanced International Journal of Banking, Accounting and Finance, 2(5), 34–44.
Mat Isa, S. S., Ma’in, M., & Hanif, A. (2015). Islamic bank's fee income and risk: Evidence from Malaysia. Advanced Science Letters, 21(5), 1546–1549.
Mega, S., Isni, A., & Taufiq, M. (2019). Performance of Indonesian Islamic banks based on Maqasid Shariah index: Stakeholder theory perspective. International Journal of Business, Accounting and Management, 4(1), 2527–3531.
Mergaliyev, A., Asutay, M., Avdukic, A., & Karbhari, Y. (2019). Higher ethical objective (Maqasid al-Shari'ah) augmented framework for Islamic banks: Assessing ethical performance and exploring its determinants. Springer.
Malaysian Institute of Accountants. (2020). Accounting for Islamic finance (First Print). MIA.
Mohammed, M. O., Abdul Razak, D., & Md Taib, F. (2008). The performance measures of Islamic banking based on the Maqasid framework. In IIUM International Accounting Conference (INTAC IV), PutraJaya Marriott (pp. 1–17). International Islamic
University Malaysia.
Mukhibad, H., Rochmatullah, M. R., Warsina, W., Rahmawati, R., & Setiawan, D. (2020). Islamic corporate governance and performance based on Maqasid Sharia index – Study in Indonesia. Jurnal Siasat Bisnis, 24(2), 114–126.
Percin, S., & Aldalou, E. (2018). Financial performance evaluation of Turkish Airline companies using integrated fuzzy AHP fuzzy TOPSIS model*. Uluslararası İktisadi ve İdari İncelemeler Dergisi.
Povera, A. (2020, September 29). PM: Govt utilises Maqasid Syariah principles in fight against Covid-19. New Straits Times. https://www.nst.com.my/news/nation/2020/09/628221/pm-govt-utilises-maqasid-syariah-principles-fight-against-covid-19-
nsttv
Rabaa, B., & Younes, B. (2016). The impact of the Islamic banks performances on economic growth: Using panel data. International Journal of Economics and Finance Studies, 8(1), 101–111.
Rahman, A. S., & Haron, R. (2019). The effect of corporate governance on Islamic banking performance: A Maqasid Shariah index approach on Indonesian Islamic banks. Journal of Islamic Finance, 8(1), 001–018.
Rahman, M. F. A., Mastuki, N. A., & Yusof, S. N. S. (2016). The performance measurement model of mosques in Malaysia based on the Maqasid Shariah index approach. Management & Accounting Review, 15(1), 131-147.
Rusydiana, A., & Al Parisi, S. (2016). The measurement of Islamic bank performance: A study using Maqasid index and profitability. Global Review of Islamic Economics and Business, 4(1), 001-014.
Rusydiana, A. S., Tanjung, H., & Marlina, L. (2018). Maslahah based measurement on Indonesia Islamic banks. International Journal of Islamic Business Ethics, 3(1), 365-382.
Sairally, S. (2007). Evaluating the social responsibility of Islamic finance: Learning from the experiences of socially responsible investment funds. Advances in Islamic Economics and Finance, 1(1), 279–320.
Saoqi, A. A. Y. (2017). Analysing the performance of Islamic banking in Indonesia and Malaysia: Maqasid index approach. Jurnal Ekonomi Islam, 8(1), 29–50.
Seçme, N. Y., Bayrakdaroǧlu, A., & Kahraman, C. (2009). Fuzzy performance evaluation in Turkish Banking sector using analytic hierarchy process and TOPSIS. Expert Systems with Applications, 36(9), 11699–11709.
SEDCO Capital. (2015). Profitability, efficiency and stability of Islamic. In Global Islamic finance report 2015 (pp. 213-228). Edbiz Consulting.
Sekaran, U. (2000). Research methods for business: A skill building approach. John Wiley & Sons.
Shahul Hameed, M. I., & Rizal, Y. (2005). The emerging issues on the objectives and characteristics of Islamic accounting for Islamic business organizations. Malaysian Accounting Review, 4(1), 75–92.
Shaukat, M., & Feroskhan, H. C. (2018). Measuring the financial growth of Islamic banks and the compliance to Maqasid Al-Shariah: An industry-wide assessment. Working Paper, Postgraduate Studies and Research Department, No. 104/2015-16.
Sulong, Z., Embi, N. C., & Ariffin, M. R. (2018). Performance of initial public offerings: Does Shariah compliance extensiveness make a difference? International Journal of Accounting, Finance and Business, 2(6), 190–205.
Syafii, M., Sanrego, Y. D., & Taufiq, M. (2012). An analysis of Islamic banking performance: Maqashid index implementation in Indonesia and Jordania. Journal of Islamic Finance, 1(1), 12–29.
Tubarad, C. P. T., Mohamad. M., & Mohammed, N. F. (2022). A decade of Maqasid Shariah research: A bibliometric analysis. Malaysia & Accounting Review, 21(2), 211-238.
Ullah, M. H., Khanam, R., & Tasnim, T. (2018). Comparative compliance status of AAOIFI and IFSB standards: An empirical evidence from Islamic Bank Bangladesh Limited. Journal of Islamic Accounting and Business Research, 9(4), 607–628.
Wanke, P., Kalam Azad, M. A., Barros, C. P., & Hadi-Vencheh, A. (2016). Predicting performance in ASEAN banks: An integrated fuzzy MCDM–neural network approach. Expert Systems, 33(3), 213–229.
Wasiuzzaman, S., & Tarmizi, H. A. A. (2010). Profitability of Islamic banks in Malaysia: An empirical analysis. Journal of Islamic Economics, Banking and Finance, 6(4), 53–68.
Abdullah, D. V., & Chee K. (2013). Islamic finance: Why it makes sense (for you) ― Understanding its principles and practices. Marshall Cavendish Business.
Abdullah, M., Shahimi, S., & Ismail, A. G. (2011). Operational risk in Islamic banks: Examination of issues. Qualitative Research in Financial Markets, 3(2), 131–151.
Ahmad, Z., & Ismail, A. G. (2017). Full reserve system and the Maqasid Shariah. Journal of Emerging Economies and Islamic Research, 5(2), 58-66.
Ahmadi, K. (2016, April 18). Islamic banking's challenges and goals. New Straits Times. https://www.nst.com.my/news/2016/04/139794/islamic-bankings-challenges-and-
goals#:~:text=If%20Islamic%20banks%20rely%20on,equity%2Dbased%20products%20and%20services.
Al-Jarhi, M. A. (2016). An economic theory of Islamic finance. ISRA International Journal of Islamic Finance, 9(2), 117–132.
Alzoubi, T. (2017). Profitability of Islamic financing tools. Banking and Finance Review, 9(1), 75–84.
Asutay, M., & Harningtyas, A. F. (2015). Developing Maqasid al-Shari'ah index to evaluate social performance of Islamic banks: A conceptual and empirical attempt. International Journal of Islamic Economics and Finance Studies, 1(1), 5–64.
Auda, J. (2008). Maqasid Al-Shariah an introductory guide. The International Institute of Islamic Thought.
Bank Negara Malaysia. (2016). Financial reporting for Islamic banking institutions. Central Bank of Malaysia.
Benitez, J. M., Martin, J. C., & Roman, C. (2007). Using fuzzy numbers for measuring the quality of service in the hotel industry. Tourism Management, 28(1), 544–555.
Dusuki, A. W. (2009). Challenges of realising Maqasid al-Shariah (objectives of Shariah) in Islamic capital market: Special focus on equity-based sukuk. In USM-ISDEV International Islamic Management Conference on Islamic Capital Market (pp. 1–
30). USM Pulau Pinang, Malaysia.
Farook, S. (2008). Social responsibility for Islamic financial institutions: Laying down a framework. Journal of Islamic Economics, Banking and Finance, 4(1), 61–82.
Fox, W. P., & Everton, S. F. (2014). Using mathematical models in decision making methodologies to find key nodes in the Noordin Dark network. American Journal of Operations Research, 04(04), 255–267.
Haniffa, R. (2002). Social reporting disclosure – An Islamic perspective. Indonesian Management & Accounting Research, 1(2), 128-146
Ibrahim, S. H. M., & Yaya, R. (2005). The emerging issues on the objectives and characteristics of Islamic accounting for Islamic business organisations. Malaysian Accounting Review, 4(1), 75–92.
Ismail, A. G., & Che Arshad, N. (2010). Financial ratio and Maqasid Shariah in evaluating the performance of microfinance institutions. (Unpublished working paper in Islamic economics and finance No. 1020). Universiti Kebangsaan Malaysia.
Kahraman, C. (2006). Fuzzy applications in industrial engineering. Springer.
Khoiriyah, V. N., & Salman, K. R. (2020). The effect of the Maqashid Shariah index, company size, and company age on Islamic social reporting. Muqtasid: Jurnal Ekonomi dan Perbankan Syariah, 11(2), 117–132.
Laldin, M. A., & Furqani, H. (2013). Developing Islamic finance in the framework of Maqasid al-Shari'ah: Understanding the ends (Maqasid) and the means (Wasa'il). International Journal of Islamic and Middle Eastern Finance and Management, 6(4),
278–289.
Mahyudin, W. A., & Rosman, R. (2020). Value-based intermediation and realisation of Maqasid Al-Shariah: Issues and challenges for Islamic banks in Malaysia. Advanced International Journal of Banking, Accounting and Finance, 2(5), 34–44.
Mat Isa, S. S., Ma’in, M., & Hanif, A. (2015). Islamic bank's fee income and risk: Evidence from Malaysia. Advanced Science Letters, 21(5), 1546–1549.
Mega, S., Isni, A., & Taufiq, M. (2019). Performance of Indonesian Islamic banks based on Maqasid Shariah index: Stakeholder theory perspective. International Journal of Business, Accounting and Management, 4(1), 2527–3531.
Mergaliyev, A., Asutay, M., Avdukic, A., & Karbhari, Y. (2019). Higher ethical objective (Maqasid al-Shari'ah) augmented framework for Islamic banks: Assessing ethical performance and exploring its determinants. Springer.
Malaysian Institute of Accountants. (2020). Accounting for Islamic finance (First Print). MIA.
Mohammed, M. O., Abdul Razak, D., & Md Taib, F. (2008). The performance measures of Islamic banking based on the Maqasid framework. In IIUM International Accounting Conference (INTAC IV), PutraJaya Marriott (pp. 1–17). International Islamic
University Malaysia.
Mukhibad, H., Rochmatullah, M. R., Warsina, W., Rahmawati, R., & Setiawan, D. (2020). Islamic corporate governance and performance based on Maqasid Sharia index – Study in Indonesia. Jurnal Siasat Bisnis, 24(2), 114–126.
Percin, S., & Aldalou, E. (2018). Financial performance evaluation of Turkish Airline companies using integrated fuzzy AHP fuzzy TOPSIS model*. Uluslararası İktisadi ve İdari İncelemeler Dergisi.
Povera, A. (2020, September 29). PM: Govt utilises Maqasid Syariah principles in fight against Covid-19. New Straits Times. https://www.nst.com.my/news/nation/2020/09/628221/pm-govt-utilises-maqasid-syariah-principles-fight-against-covid-19-
nsttv
Rabaa, B., & Younes, B. (2016). The impact of the Islamic banks performances on economic growth: Using panel data. International Journal of Economics and Finance Studies, 8(1), 101–111.
Rahman, A. S., & Haron, R. (2019). The effect of corporate governance on Islamic banking performance: A Maqasid Shariah index approach on Indonesian Islamic banks. Journal of Islamic Finance, 8(1), 001–018.
Rahman, M. F. A., Mastuki, N. A., & Yusof, S. N. S. (2016). The performance measurement model of mosques in Malaysia based on the Maqasid Shariah index approach. Management & Accounting Review, 15(1), 131-147.
Rusydiana, A., & Al Parisi, S. (2016). The measurement of Islamic bank performance: A study using Maqasid index and profitability. Global Review of Islamic Economics and Business, 4(1), 001-014.
Rusydiana, A. S., Tanjung, H., & Marlina, L. (2018). Maslahah based measurement on Indonesia Islamic banks. International Journal of Islamic Business Ethics, 3(1), 365-382.
Sairally, S. (2007). Evaluating the social responsibility of Islamic finance: Learning from the experiences of socially responsible investment funds. Advances in Islamic Economics and Finance, 1(1), 279–320.
Saoqi, A. A. Y. (2017). Analysing the performance of Islamic banking in Indonesia and Malaysia: Maqasid index approach. Jurnal Ekonomi Islam, 8(1), 29–50.
Seçme, N. Y., Bayrakdaroǧlu, A., & Kahraman, C. (2009). Fuzzy performance evaluation in Turkish Banking sector using analytic hierarchy process and TOPSIS. Expert Systems with Applications, 36(9), 11699–11709.
SEDCO Capital. (2015). Profitability, efficiency and stability of Islamic. In Global Islamic finance report 2015 (pp. 213-228). Edbiz Consulting.
Sekaran, U. (2000). Research methods for business: A skill building approach. John Wiley & Sons.
Shahul Hameed, M. I., & Rizal, Y. (2005). The emerging issues on the objectives and characteristics of Islamic accounting for Islamic business organizations. Malaysian Accounting Review, 4(1), 75–92.
Shaukat, M., & Feroskhan, H. C. (2018). Measuring the financial growth of Islamic banks and the compliance to Maqasid Al-Shariah: An industry-wide assessment. Working Paper, Postgraduate Studies and Research Department, No. 104/2015-16.
Sulong, Z., Embi, N. C., & Ariffin, M. R. (2018). Performance of initial public offerings: Does Shariah compliance extensiveness make a difference? International Journal of Accounting, Finance and Business, 2(6), 190–205.
Syafii, M., Sanrego, Y. D., & Taufiq, M. (2012). An analysis of Islamic banking performance: Maqashid index implementation in Indonesia and Jordania. Journal of Islamic Finance, 1(1), 12–29.
Tubarad, C. P. T., Mohamad. M., & Mohammed, N. F. (2022). A decade of Maqasid Shariah research: A bibliometric analysis. Malaysia & Accounting Review, 21(2), 211-238.
Ullah, M. H., Khanam, R., & Tasnim, T. (2018). Comparative compliance status of AAOIFI and IFSB standards: An empirical evidence from Islamic Bank Bangladesh Limited. Journal of Islamic Accounting and Business Research, 9(4), 607–628.
Wanke, P., Kalam Azad, M. A., Barros, C. P., & Hadi-Vencheh, A. (2016). Predicting performance in ASEAN banks: An integrated fuzzy MCDM–neural network approach. Expert Systems, 33(3), 213–229.
Wasiuzzaman, S., & Tarmizi, H. A. A. (2010). Profitability of Islamic banks in Malaysia: An empirical analysis. Journal of Islamic Economics, Banking and Finance, 6(4), 53–68.
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2023-09-30
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The disclosure practices on Maqasid Shariah objectives among Malaysian Islamic banks using fuzzy Topsis assessment. (2023). Journal of Nusantara Studies (JONUS), 8(3), 109-133. https://doi.org/10.24200/jonus.vol8iss3pp109-133
