Muhammad Tariq Majeed and Abida Zainab
Islamic banks provide an alternative financial system based on Sharia’h (Islamic law). However, critics argue that operation at Islamic banks is violating Sharia’h particularly in…
Abstract
Purpose
Islamic banks provide an alternative financial system based on Sharia’h (Islamic law). However, critics argue that operation at Islamic banks is violating Sharia’h particularly in terms of provision of interest free services, risk sharing and legal contract. The purpose of this paper is to empirically evaluate the Sharia’h practice at Islamic banks in Pakistan by considering some basic principles of Sharia’h.
Design/methodology/approach
Primary data are collected from 63 branches of Islamic banks in Pakistan. Questionnaire is used as an instrument. The study uses structural equation modeling that includes confirmatory factor analysis and regression analysis. Data are codified and analyzed using SPSS and Amos.
Findings
This study finds that Islamic banks are providing interest free services, ensuring that transactions and contracts offered by Islamic banks are legal and offering conflict-free environment to customers. In contrast, estimated results expose that Islamic banks are not sharing risk and Sharia’h supervisory board is not performing its role perfectly. Similarly, it is found that organization and distribution of zakat and qard-ul-hassan are weak at Islamic banks.
Research limitations/implications
Data are collected from Islamabad federal capital of Pakistan that hold just 5 per cent share of Islamic banking industry. This small share may not provide true picture of Islamic banking sector.
Practical implications
To ensure risk sharing, Islamic banking industry must consider the development of new modes of financing and innovation of more products based on Sharia’h. State Bank of Pakistan should ensure separate regulatory framework that enable Islamic banks to provide qard-ul-hassan, organize and allocate zakat.
Originality/value
This paper discusses the perception of bankers, who are actually the executors, about Shariah’s practices at Islamic banks in Pakistan. There are not many discussions on this topic that could be found, and hence this could be considered as a significant contribution by this paper to the existing literature of Islamic finance.
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Muhammad Tariq Majeed and Abida Zainab
In recent years, the fast growth of Islamic banks (IBs) has generated debates among policymakers and economists about the sustainability and performance of these institutions…
Abstract
Purpose
In recent years, the fast growth of Islamic banks (IBs) has generated debates among policymakers and economists about the sustainability and performance of these institutions. This paper aims to undertake a comparative analysis of the financial performance of IBs and conventional banks (CBs) in Pakistan over the period 2008–2019 to evaluate how IBs are faring compared to their conventional peers.
Design/methodology/approach
This paper considers Financial Ratio Analysis (FRA) to analyse and compare the performance of the top-10 IBs and CBs operating in Pakistan. The sample includes five full-fledged IBs and five CBs which offer Islamic windows in Pakistan. The top-five performing CBs offering Islamic windows have been selected in this study.
Findings
The results show that IBs are better capitalized, less risky and have higher liquidity as compared to CBs. In contrast, the profits of IBs are found to be lower than those of CBs.
Research limitations/implications
The study has provided an analysis of financial performance only for Pakistan. A cross-country analysis could be more representative of the performance of IBs.
Practical implications
The study infers that the size of the Islamic banking industry in Pakistan should be enhanced by opening new branches and promoting Islamic financial literacy.
Originality/value
The study assists investors, creditors, debtors and managers in making better decisions. It also provides the latest valuable information to regulators and policymakers that can be used to make rules and policies for the finance industry in Pakistan.
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Muhammad Tariq Majeed and Abida Zainab
Increasing popularity of Islamic banks in the wake of recent global financial crisis of 2008 has generated debate among researcher about practicality of Islamic banks. Critics…
Abstract
Purpose
Increasing popularity of Islamic banks in the wake of recent global financial crisis of 2008 has generated debate among researcher about practicality of Islamic banks. Critics argue that Islamic banks are not working according true spirits of Sharia’h. This paper aims to empirically address the question that how Islamic is Islamic banking in the case of Pakistan.
Design/methodology/approach
The target population in this paper is staff at the Islamic banks who are employees and managers. Data are also collected from customers to analyze their views. Sample comprises 63 branches of five full-fledge Islamic banks and five Islamic branches of conventional banks in Islamabad. For analysis purpose, the study uses exploratory factor analysis.
Findings
Findings indicate that Islamic banks are following Sharia’h excluding the provision of profit loss sharing contracts and provision of qard-ul-hassan. Moreover, it is found that customers are less agreed and more neutral about Sharia’h-based operations at Islamic banks.
Originality/value
Findings will help regulators to introduce wide range of Islamic financial contracts that involve profit loss sharing and consider the expansion of emerging industry. Moreover, findings suggest to consider promotional techniques to create awareness of Islamic banking among the customers.
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Riyad Moosa and Smita Kashiramka
This study aims to explore the relationship between the objectives of Islamic banking, customer satisfaction and customer loyalty in the South African context. Diving deep, this…
Abstract
Purpose
This study aims to explore the relationship between the objectives of Islamic banking, customer satisfaction and customer loyalty in the South African context. Diving deep, this study also explores the relationship between customer satisfaction and customer loyalty.
Design/methodology/approach
Purposive and snowball sampling techniques were used, resulting in 163 respondents participating in this study. The data was collected using an online survey and analysed using a structural equation model based on the partial least squares method.
Findings
The results indicate that the construct related to the objectives of Islamic banking influences both customer satisfaction and customer loyalty. In addition, customer satisfaction is also found to influence a customer’s loyalty to the Islamic bank.
Originality/value
In South Africa, to the best of the authors’ knowledge, this study is the first of its kind; thus, the results provide context-specific insights into the extant literature on Islamic banking for Muslims residing in a non-Muslim majority country.