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THE REVIEW OF ISLAMIC CORPORATE SOCIAL

RESPONSIBILITY STANDARD AND LITERATURE:

FUTURE RESEARCH FOR MALAYSIAN ISLAMIC BANKS

Fatimah Noor Rashidah Mohd Sofian1

Rusnah Muhamad2

1 PhD student at University of Malaya; Lecturer at International Islamic University Malaysia

Email: fatimahnoorrashidah@gmail.com 2 Lecturer at University of Malaya

Accepted date: 14-04-2019

Published date: 20-06-2019

To cite this document: Mohd Sofian, F. N. S., & Muhamad, R. (2019). The Review of Islamic

Corporate Social Responsibility Standard and Literature: Future Research for Malaysian

Islamic Banks. Journal of Islamic, Social, Economics and Development (JISED), 4(20), 24 -

46. __________________________________________________________________________________________

Abstract: The Malaysian government has shown strong support towards the involvement in

corporate social responsibility (CSR) and the disclosure of CSR activities by the Islamic

financial institutions (IFI) and the Islamic banking sector. Despite the support, there is no

Islamic CSR standard established in Malaysia specifically for Islamic banks even though

several CSR standards comprising conventional elements have been issued. This, therefore,

evinces the need to propose an Islamic CSR guideline. Indeed, the Accounting and Auditing

Organization for Islamic Financial Institutions (AAOIFI) has issued an Islamic CSR standard,

and there is a growing amount of Islamic CSR and corporate social responsibility disclosure

(CSRD) literature related to the framework. Hence, the objective of this study is to identify the

current state of Islamic CSR standard and its framework, and the gaps for improvement in

proposing an Islamic CSR guideline for the Malaysian Islamic banks. An analysis from the

systematic literature of AAOIFI Islamic CSR standard, and Islamic CSR and CSRD literature

from Web of Science and SCOPUS found that there is a need to improvise Islamic CSR

guideline for the Malaysian Islamic banks due to the inconsistencies of the existing Islamic

CSR frameworks in the Malaysian context.

Keywords: Islamic CSR, standard, framework, Islamic banks, Malaysia

___________________________________________________________________________

Introduction

It is worth noting that the Malaysian government aspires to achieve Vision 2020 which is, to

become an entirely developed country by the year 2020 in the economic, political, social,

spiritual, psychological and cultural segments (Mohammad, 1991). Hence, a revolution is

needed in the economic, social, and government sector (National Economic Advisory Council,

2009). According to the National Institute of Public Administration (INTAN) (2015),

Economic Transformation Programme (ETP) and 11th Malaysia Plan are one of the national

Volume: 4 Issues: 20 [June, 2019] pp. 24 - 46]

Journal of Islamic, Social, Economics and Development (JISED) eISSN: 0128-1755

Journal website: www.jised.com

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agendas for realising Vision 2020. Ismail, Alias, and Mohd Rasdi (2015) state that through the

ETP pillars, private corporations are considered to be the main enablers of the economic and

social developments. Apparently, the Malaysian government announced that Malaysia aims to

become an international Islamic financial hub (Performance Management & Delivery Unit

(PEMANDU) (2013). This is due to the fact that Islamic banks have the ability to increase

financial inclusion and promote real economic activity (Bank Negara Malaysia (BNM), 2015a,

2015b). Imam and Kpodar (2013) assert that the banking sector gives the most important

contributions to the financial industry and hence, the country’s economic growth as it

accelerates savings and manages funds efficiently. In light of this matter, this study is focused

on the Islamic banking sector involving private corporations. In addition to this, the issuance

of the 11th Malaysia Plan 2016-2020 has promoted the incorporation of corporate social

responsibility (CSR) activities in various sections. The activities include providing financing

sources to small-medium enterprises (SMEs), assisting the health sector, working

collaboratively in the environmental sector with the government, private organisations and the

society, and providing financial support to Bumiputra entrepreneurs involved in the halal

industry which can further improve the society’s living standards by 2020 (Economic Planning

Unit, 2015). From the 11th Malaysia plan, it can be seen that the Malaysian government shows

great eagerness to encourage the public and private organisations to be engaged in CSR

activities.

Besides, the government is certain that the involvement in CSR and the disclosure of CSR

activities will increase the profits gained by the organisations and enhance their good image

(Othman, Darus, & Arshad, 2011). The inception of the Silver Book on September 25, 2006,

was the critical point to manifest the support given by the government towards disclosing CSR

activities (Wan Abd Rahman, Zain, & Yaakop Yahya Al-Haj, 2011). This is to say, the

government has seriously urged the organisations to be involved in CSR activities as well as

disclosing CSR information to the public. Besides, in the 2007 Budget, the government has

announced an increase in tax deduction from 5% to 7% for private organisations if there is an

involvement in charitable activities and sports (Ahmad Badawi, 2007; Amran, Ling, & Sofri,

2007). Hence, it shows that the government is eager not only to support Malaysian

organisations’ involvement in CSR but also to urge the companies to learn from developed

countries in implementing CSR and practising corporate social responsibility disclosure

(CSRD). Similarly, due to the announcement of the 2007 Budget, Bursa Malaysia has taken

the initiative to develop a CSR guideline for public-listed companies. Bursa Malaysia has

required CSRD to be mandatory in the annual report for all public-listed companies. This serves

as a stepping stone for the organisations to act responsibly towards the society (Fatima,

Abdullah, & Sulaiman, 2015). However, the guideline is only provided for the public-listed

companies excluding the remaining organisations and Islamic banks that are not listed in Bursa

Malaysia.

Problem statement Therefore, the above matter implies that there is no Islamic CSR guideline established for

Malaysian Islamic banks (Wan Jusoh & Ibrahim, 2017) despite Malaysia’s objective to become

an international Islamic financial hub (PEMANDU, 2013). Islamic CSR guideline is important

in order to distinguish the business operation of Islamic banks from that of conventional banks

(Darus, Yusoff, Abang Naim, Amran, & Fauzi, 2018). Besides, due to the tarnished reputation

of Lembaga Tabung Haji, there is a need for transparency in Islamic banks to prevent

stakeholders’ negative judgment (Bani, Mohd Ariffin & Abdul Rahman, 2015; Mohd Pauzi,

Abdul-Rahman, & Mohd Nor, 2017). Hence, prior to developing an Islamic CSR guideline,

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this study seeks to identify the current state of Islamic CSR standard and its existing framework

proposed by international bodies and scholars.

Thus, the objective of this paper is to review Islamic CSR standard and related articles in order

to identify to what extent international bodies and scholars have developed Islamic CSR

framework, and whether there is a gap that can be improved in proposing Islamic CSR

guideline for Malaysian Islamic banks. The present study contributes to the field of Islamic

banking by evoking awareness about the conceptualization of CSR from the Islamic

perspective propagated by scholars and practitioners. The current conceptualization of CSR

can be used to propose an Islamic CSR guideline that is relevant to Islamic banking in the

Malaysian context.

Literature review

CSR and CSRD

CSR can be defined as the involvement of social, economic and environmental responsibilities.

According to Carroll (1979), CSR consists of four dimensions, which are economic, legal,

ethical, and philanthropic. Freeman (1984) believes that an organisation should have

responsibilities towards the shareholders, and stakeholders. Meanwhile, Friedman (1970)

highlights that, CSR should only be involved in making profits when it is in line with the law

and practised in the right manner.

From an Islamic perspective, the Accounting and Auditing Organisation for Islamic Financial

Institutions (AAOIFI) (2010) states that the involvement in CSR by Islamic financial

institutions is related to religious, economic, legal, ethical and discretionary responsibilities.

Meanwhile, Khurshid, Al-Aali, Soliman, and Amin (2014) highlight that the Islamic CSR

model is derived from the theory developed by Carroll (1979) consisting of the economic, legal,

ethical and philanthropic dimensions. The economic dimension acts as a basis for the CSR

pyramid. Carroll (1991) concludes that the organisations should make profits in accordance

with the law and ethics. Carroll (1991) explains that the organisations must target to maximise

earnings per share in an appropriate way, be profitable as possible, be competitive, operate

efficiently, and be consistent in making profits. In terms of legal responsibilities, every business

organisation is expected to operate in compliance with the established rules and regulations

(Carroll, 1979). Meanwhile, ethical responsibilities indicate that the organisations must act

ethically even though it is not specifically stated in the existing rules and regulations. The

stakeholders, specifically, expect the business organisations to uphold ethical responsibilities

beyond the codified laws. For instance, the organisations should carry out ethical actions such

as being fair and protecting the rights of the stakeholders (Carroll, 1991). Lastly, philanthropic

responsibilities imply charitable activities that the business organisations conduct on a

voluntary basis but which are not required by law, and do not fall under ethical categories

(Carroll, 1979).

Despite the definition of CSR proposed by various scholars, there is no consensus on the

definition of CSR (Hou & Li, 2014). Moreover, CSR practices are different because of the

diversity of culture and environment (Aksak, Ferguson, & Duman, 2016).

CSRD, on the other hand, is a documentation to advise the stakeholders on the effects of the

economic, social and environmental information towards the institution’s performance during

the year (Garcia-Sanchez, Cuadrado-Ballesteros, & Sepulveda, 2014). Through CSRD the

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stakeholders can monitor the activities that the banks have been conducted during the year by

which the performance of the banks can be analysed systematically. Nevertheless, Reverte

(2009) claims no regulation or consistency is found with regard to the reported items, or the

format of reporting. Therefore, due to inconsistencies, there is a need for this study to review

the current standard and literature about Islamic CSR.

CSR standards in Malaysia

Silver Book is one of the strategies derived from the Government Linked Company (GLC)

Transformation Programme and approved by the Putrajaya Committee on GLC High

Performance (PCG), and included in the GLC Transformation Manual (Putrajaya Committee

on GLC High Committee, 2015). Silver Book is a guideline to disclose CSR information for

the government-linked companies which emphasise seven core areas namely human rights,

employee welfare, customer service, supplier partnership, environmental protection,

community involvement and ethical business behaviour (Zahid & Ghazali, 2015). The

establishment of Silver Book is important to assist the government-linked companies to

actively engage in social activities which will then be displayed in the reporting. It is expected

that other organisations will be aspired to follow the action of the government-linked

companies (Othman et al., 2011; Putrajaya Committee on GLC High Committee, 2015).

Indeed, Amran et al. (2007) opine that the implementation of Silver Book will trigger the

companies in Malaysia to disclose CSR activities. Conceivably, it shows that the Malaysian

companies are new to CSRD, and still learning how to benefit from it compared with large

companies in developed countries. This turns out to be true when the announcement of 2007

Budget in September 2006 required public-listed companies to be involved in CSR and disclose

CSR activities in their annual reports. This thus marked an important point for the CSR

development in Malaysia (Ahmad Badawi, 2007). Meanwhile, the Sustainability Reporting

Guide (Bursa Malaysia Securities Berhad, 2015) is only and specifically created for public-

listed companies. In Malaysia, there is only one public-listed Islamic financial institution in

Bursa Malaysia namely BIMB Holdings Berhad. The established Guide covers three

dimensions which are economic, environment and social. These dimensions are known as EES.

Although the Guide provides a systematic guideline for social responsibility disclosure, it does

not include any Islamic elements. Therefore, there is a need to propose a specific Islamic CSR

guideline for the Malaysian Islamic banks.

Previous literature on CSRD in Malaysia

Previous literature has shown that the level of CSRD in Malaysia is gradually increasing after

the announcement of the government’s support, the issuance of Silver Book and Bursa

Malaysia’s mandatory requirement (e.g., Esa & Mohd Ghazali, 2012; Fatima et al., 2015; Haji,

2013; Wan Abd Rahman et al., 2011). Thus, this evinces that, with the issuance of the CSR

standard and the government’s support, CSRD can be done. This has been supported by Saleh,

Zulkifli, and Muhamad (2011) that participation from the government and regulators in fostering CSR advantages has gradually increased the engagement of Malaysian organisations

in CSR. Indeed, this has directly nurtured the organisations’ reputation and improved their

legitimacy. In order to strengthen the idea that the government’s involvement leads to a higher

level of CSRD, empirical evidence presented by Said, Zainuddin, and Haron (2009) proves that

when there is an ownership of government in the companies, the tendency to disclose more

CSR activities is higher. This is supported by Amran and Devi (2008) who state that the

intervention of the government in the organisations will influence the disclosure of CSR.

Hence, it shows that the government takes CSR as an important element in Malaysia’s

economic growth.

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Previous literature on CSRD in Islamic banks

Majority of the studies used content analysis to analyse Islamic banks’ annual reports. For

instance, Adapa (2013) and Mallin, Farag, and Ow-Yong (2014) analysed the banks’ websites

and Islamic banks’ annual reports. There are studies that analysed newsletters, newspapers,

magazines, banks’ publication, and sustainability reports besides the banks’ annual reports and

websites (e.g., Darus et al., 2014; Kamrujjaman & Uddin, 2015; Samina, 2012; Tuhin, 2014).

An empirical study found that Islamic banks did not disclose all of the CSR dimensions that

are in line with Shariah principles (Darus, et al, 2014; El-Halaby & Hussainey, 2015; Farook,

Hassan, & Lanis, 2011). For example, less disclosure on the environmental dimension (Aribi

& Arun, 2015; Mallin et al., 2014; Abdul Rahman & Bukair, 2013), social dimension, and

ethical dimension in the CSR practices of Islamic banks (Aribi & Arun, 2015; Khan, 2013;

Abdul Rahman & Bukair, 2013). In fact, Islamic banks are only keen to disclose the economic

dimension (El-Halaby & Hussainey, 2015; Rashid, Abdeljawad, Ngalim, & Hassan, 2013).

Indeed, the level of CSRD is ranged from low to moderate (e.g., Arfan & Hisda, 2013; Arshad,

Othman & Othman, 2012; Fitriyah & Oktaviana, 2014; Musibah & Wan Yusoff Alfattani,

2013; 2014). However, the level of CSRD is high in 53 Islamic banks from the Gulf

Cooperation Council (GCC) countries (Bukair & Abdul Rahman, 2015). This implies that the

disclosure of CSR is inconsistent (Aribi & Arun, 2015; Farook et al., 2011; Khan, 2013). In

summary, the CSR practised by Islamic banks is diversified across the countries. Thus, there

is a need to propose an established guideline to reduce the inconsistencies of CSRD.

Methodology

A systematic literature review focuses on the literature with reference to specific questions that

aim to identify, select, organise and analyse data from related studies critically. Thus, the main

research questions posed in this article are to acknowledge;

• What is the current state of the Islamic CSR framework particularly Islamic CSR

dimensions, elements, and indexes?

• What are the main gaps that the Islamic CSR dimensions, elements, and indexes

should include in the proposed Islamic CSR guideline for the Malaysian Islamic

banks?

Literature research

The current study presents a review of Islamic CSR standard and extant literature concerning

Islamic CSR. The AAOIFI Islamic CSR standard issued by the AAOIFI in 2010 has been

referred to throughout the review. This is due to the fact that the AAOIFI leads the development

and issuance of standards for the global Islamic finance industry, whose steps have inspired

other prominent Islamic financial institutions across the world. The AAOIFI has named the

CSR standard as the Governance Standard No. 7: Corporate Social Responsibility, Conduct and Disclosure for Islamic Financial Institutions.

Meanwhile, Islamic CSR articles revolve around CSR and corporate social responsibility

disclosure (CSRD) topics. Google Scholar was used as the primary search engine to gain

detailed and reliable information related to the subject matter. The keyword used for the search

is “Islamic corporate social responsibility”. The articles reviewed were taken among those

published from 2014 until 2018. The researchers restricted articles that have been published

within five aforementioned years in order to ensure that only relevant and updated dimensions

and indexes are taken into account. The articles were restricted to English articles only.

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Search output

In phase one, a total of 26, 300 research articles were retrieved from Google Scholar using the

keyword “Islamic corporate social responsibility”. All the articles must be concerned with

Islamic banks, Islamic financial institutions, framework, disclosure, and reporting related to

the framework, dimensions, elements and indexes. In particular, the articles must be within the

scope of Islamic literature. Hence, a total of 106 related articles were found.

In phase two, the researchers searched the articles for the second time based on year, from 2014

to 2018, in order to ensure that no relevant article is left out. The researchers restricted the

selection of the articles only from Web of Science and SCOPUS. In addition, only articles that

provide detailed information on CSR dimensions, elements and indexes were analysed. Hence,

out of 106 articles, only 24 articles met the criteria. Notably, there were 10 articles from Web

of Science and 14 articles from SCOPUS. The distribution of the articles is displayed in Table

1.

Table 1: Distribution of the reviewed articles by the researchers

Description Total

Web of Science 10

SCOPUS 14

Total Web of Science and SCOPUS reviewed articles 24

Extraction of data

The final analysis comprised 24 articles. The articles were categorised into five main groups,

namely articles that provide CSR dimensions; CSR indexes; CSR dimensions and elements;

CSR dimensions and indexes; CSR dimensions, elements and indexes. Besides, the study

reviewed the Islamic CSR standard which has been issued by the AAOIFI.

Findings and discussion

Review on Islamic CSR standards

The Islamic CSR standard issued by the AAOIFI has been named as the Governance Standard

No. 7: Corporate Social Responsibility, Conduct and Disclosure for Islamic Financial

Institutions. The AAOIFI CSR standard has been divided into two which are mandatory, and

recommended as shown in Appendix A. Mandatory disclosure consists of disclosure of policy

on screening clients, disclosure of policy for dealing with clients, disclosure of earning and expenditure prohibited by Shariah, disclosure of policy for employee welfare and disclosure

of policy for zakah. Voluntary disclosure refers to the disclosure of policy on social,

development and environment-based investment quotas, disclosure of policy on par excellence

customer service, disclosure of policy on micro and small businesses and social savings and

investments, disclosure of policy on qard hasan, disclosure of policy on charitable activities,

and disclosure of policy on waqf management.

Nevertheless, this standard still has a loophole that needs to be closed. Hassan and Harahap

(2010) assert that the AAOIFI should add other elements such as ethical behaviour, customer

relation, diversity and environmental policies, besides incorporating other features of CSR such

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as transparency, accountability and partnership into the standard. Moreover, it is worth

emphasising that Malaysia does not adopt the AAOIFI CSR standard (AAOIFI, 2017). Hence,

considering this fact, Islamic CSR literature has been reviewed.

Review on Islamic CSR articles

24 Islamic CSR articles published from the year 2014 to 2018 were reviewed. The articles

revolve around the topics relating to Islamic CSR and CSRD. The articles provide information

regarding CSR dimensions (e.g., Abu Bakar & Md Yusof, 2016; Franzoni & Allali, 2018),

CSR indexes (e.g., Hidayat & Alhur, 2016), CSR dimensions and elements (Tarique, Ahmed,

Hossain, & Momen, 2018), CSR dimensions and indexes (Platonova, Asutay, Dixon, &

Mohammad, 2018; Darus, Amran, Nejati, & Yusoff, 2014) and CSR dimensions, elements and

indexes (Alamer, Salamon, Qureshi, & Rasli, 2015).

Articles on CSR dimensions

Appendix B shows three articles concerning CSR dimensions. The articles are all empirical in

nature. For instance, Franzoni and Allali (2018) propose Islamic CSR dimensions based on the

definition of CSR given by the AAOIFI (2010). The CSR dimensions consist of economic

responsibility, discretional responsibility, ethical responsibility, legal responsibility and

religious responsibility. The Islamic CSR dimensions were reviewed to identify whether they

can be merged with conventional CSR based on the case studies of two banks. Indeed, the

authors found that the Islamic CSR, and the conventional CSR can be converged. However,

the only difference that stands out between these two types of CSR is in terms of religious

responsibility. It evinces that Islamic CSR dimensions are attached to the concept of religious

obligation that Islamic banks must fulfil. Meanwhile, Hamidi and Worthington (2018)

developed a framework for Islamic social banking to measure the social performance of Islamic

social banking. It is said that Islamic social banking could overcome Islamic banking’s failure

to find balance between financial and social outcomes (Hamidi & Worthington, 2018). The

proposed framework consists of four dimensions which are prosperity (sustainable profit),

planet (environmental sound), people (socially oriented) and Prophet to achieve Maqasid al-

shariah. Indeed, scholars have different opinions concerning the conceptualization of Islamic

CSR due to the difference in achieving the objectives. On the other hand, Abu Bakar and Md

Yusof (2016) have come up with a framework to manage CSR initiatives based on Tawhidic,

and Shariah paradigm by using a case study of Bank Islam Malaysia Berhad (BIMB). There

are four phases of CSR initiatives management namely environmental scanning, designing

CSR initiatives, implementing CSR initiatives and evaluating CSR initiatives. Among the four

phases of managing CSR initiatives, designing CSR initiatives also gives focus on religious

responsibility. Evidently, all of the three authors stress that Islamic CSR dimensions should be

instilled with Shariah elements. Notably, Abu Bakar and Md Yusof (2016) emphasise that CSR

initiatives must be disclosed in order to increase the awareness of the stakeholders. The next

section discusses articles on CSR indexes only.

Articles on CSR indexes

Both of the articles reviewed herewith are empirical. The studies developed CSR indexes based

on the underlying theories or standards. Besides, the CSR indexes have been perceived as to

whether the stakeholders agree or disagree with the indexes. For example, Mohd Nor, Abdul

Rahim, and Senik (2016) provided seven indexes to gauge the perception of the customers and

the employees of Islamic banks in Malaysia regarding what should social banking be like. The

result of their study reported that the respondents agreed that assisting community development

implies social banking. Nonetheless, the remaining six indexes are within the boundaries of

social banking as well. The indexes were formed based on the Islamic economic theory which

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consists of tawhid, ‘adl, rububiyyah, tazkiyyah, ukhuwwah and unity. These principles must be

in line with the Quran and Hadith. Whereas, Hidayat and Alhur (2016) asked the depositors of

Islamic bank in Saudi Arabia to respond whether they are aware of the CSR activities based on

the AAOIFI CSR standard. The findings report that the depositors are more aware of one of

the CSR activities of Islamic banks which is, the policy on screening clients for Shariah

compliance. In addition, the depositors are not aware of other CSR activities such as policy on

managing Waqf properties, assisting poor and needy individuals and families in terms of health,

education, and business. On a related note, both of the articles seem to contradict each other.

This is perhaps due to the fact that the empirical studies were conducted in different countries.

Hence, the preference for the conceptualization of CSR indexes is different depending on the

environment and culture. The next article discusses about CSR dimensions and elements.

Article on CSR dimensions and elements

Appendix D provides the article on CSR dimensions and elements. There is only one article in

this section in which the authors have analysed CSR activities in Islami Bank Bangladesh

Limited (IBBL) (Tarique et al., 2018). The analysis of the CSR activities was done with

reference to the level of maqasid al-shariah. The level of maqasid shariah is divided into

necessities (daruriyyat), complements (hajiyyat) and embellishments (tahsiniyyat). The

analysis of CSR activities from the annual report of IBBL found that education, health,

humanitarian and disaster relief represent necessities. Meanwhile, the environment represents

complements. Lastly, sports and arts, literature and culture represent embellishment. Thus, in

the Bangladesh context, CSR activities are more focused on the welfare of society. This study,

however, has a clear-cut limitation as it does not focus on the Malaysian context. In addition,

the analysis was conducted from 2009 to 2013. Thus, the level of maqasid al-shariah could

change due to the transition of the period. The next section reviews the CSR dimensions and

indexes proposed by previous scholars.

Articles on CSR dimensions and indexes

In this section, the articles on CSR dimensions and indexes have been reviewed as shown in

Appendix E. The articles consist of theoretical and empirical research. There is one article

preseting theoretical research (Khurshid et al., 2014), whilst the remaining articles present

empirical research particularly content analysis (Platonova et al. 2018; Yusoff, Mohd Azhari,

& Darus, 2018; Sherif, Khaled, Mohamed, & Hussein, 2018; Ahmed & El-Belihy, 2017; El-

Halaby & Hussainey, 2015; Aribi & Arun, 2015; Belal, Abdelsalam, & Nizamee, 2015; Abduh

& AlAgeely, 2014; Mallin et al., 2014; Darus et al., 2014) and survey perceptions on CSR

dimensions and indexes (Kunhibava, Ling, & Ruslan, 2018; Marsidi, Annuar, & Abdul

Rahman, 2017; Di Bella & Al-Fayoumi, 2016).

From the theoretical part, Khurshid et al. (2014) provided an Islamic CSR framework entailing

the combination of both conventional and Islamic elements taken from Carroll, the Quran and the Sunnah. Hence, based on the principles applied, the proposed Islamic CSR framework

consists of economic, legal, ethical and philanthropic elements.

On the other hand, there are empirical studies that have conducted content analysis with regard

to CSR dimensions and indexes. Some of the scholars provide CSR dimensions and indexes to

examine the level of CSRD and the relationship between the variables. Most of the CSR

dimensions and indexes for this study were taken from the previous Islamic CSR literature and

conventional literature, but they are not up-to-date. For example, most of the scholars used the

AAOIFI standard as one of their references in developing the CSR checklist to analyse CSR

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activities in the secondary data (El-Halaby & Hussainey 2015; Platonova et al., 2018; Abduh

& AlAgeely, 2014). Nevertheless, as stated by Hassan and Harahap (2010), the AAOIFI

standard needs some improvements. In addition, Malaysia does not adopt the AAOIFI standard.

Even though Yusoff et al. (2018) used Bursa Malaysia in 2007 as one of the references to

provide a CSR checklist, CSR dimensions and indexes need to be reviewed again as Bursa

Malaysia has now provided a new guideline for CSR which needs to be followed by public-

listed companies (Bursa Malaysia Securities Berhad, 2015). Meanwhile, these scholars (Aribi

& Arun, 2015; Belal et al., 2015; Mallin et al., 2014; Platonova et al., 2018; Sherif et al., 2018)

adopted Haniffa and Hudaib’s (2007) Ethical Identity Index (EII) as one of their references for

CSR checklist. In fact, Ahmed & El-Belihy (2017) used the EII (Haniffa & Hudaib, 2007)

solely for CSR checklist. This shows that EII (Haniffa & Hudaib, 2007) is relevant and

reputable to be applied by Islamic banks in this era. However, the study done by Haniffa and

Hudaib (2007) did not include information regarding the environment. Environmental

dimension is important to be included as it is part of the Khalifah (vicegerency) principle which

indicates that a person is responsible to take care of the earth’s resources (Wan Jusoh, Ibrahim,

& Mohd Napiah, 2015). Secondly, previous literature adapted by Haniffa and Hudaib (2007)

was not solely concerned with the banking sector. This is to say, although Haniffa and Hudaib

(2007) adapted both Islamic and conventional literature and standards, the conventional

literature did not come solely from the banking sector. For example, Haniffa and Hudaib (2007)

adapted the literature from Guthrie and Parker (1989). Accordingly, Guthrie and Parker (1989)

developed an index for Australia mining or manufacturing industries. Thus, it shows that

Haniffa and Hudaib (2007) did not refer to the banking sector solely. Thirdly, the EII index

was used by Haniffa and Hudaib (2007) to conduct content analysis in Arabian Gulf Region

countries. Lastly, the EII has not been validated by highly qualified panels, and through

exploratory factor analysis (EFA). Meanwhile, Darus et al. (2014) developed an Islamic CSR

framework to evaluate the level of CSRD. Although the development of the Islamic CSR

framework has undergone several stages including obtaining responses from researchers,

Islamic scholars, and the industry, there is still a gap in this framework. Consequently, the

Islamic CSR framework intends to focus on both Malaysia and Indonesia. Adding to this, the

Islamic CSR framework has not been validated through exploratory factor analysis (EFA) and

confirmatory factor analysis (CFA). Therefore, the CSR dimensions and indexes still need to

be examined thoroughly.

In contrast, there are CSR dimensions and indexes that have been referred to and that are

concerned with the perceptions of the stakeholders. For example, Di Bella and Al-Fayoumi’s

(2016) study developed an Islamic CSR concept and its dimensions that are rooted in the

Islamic ethical system, represented through profit and loss arrangements, embedded within the

principles of Islamic banks, and benchmarked by the AAOIFI. As a result, the stakeholders in

Jordan showed positive preferences towards the Islamic CSR dimensions. In contrast,

Kunhibava et al. (2018) and Marsidi et al. (2017) conducted specific studies in Malaysia. However, the studies only covered part of the CSR dimensions. For instance, in the study done

by Kunhibava et al. (2018), the CSR dimensions and indexes only covered the environmental

and green practices aspect. Meanwhile, Marsidi et al. (2017) covered the social part of CSR

whereby the authors found that sadaqa or donation is perceived to be important by the

Malaysian Islamic banks. The next section reviews CSR dimensions, elements and indexes.

Articles on CSR dimensions, elements and indexes

In Appendix F, the reviewed articles deliver information regarding CSR dimensions, elements

and indexes. Most of the reviewed articles have taken reference from Islamic literature (Alamer

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et al., 2015; Amran et al., 2017; Darus et al., 2018). Hence, it shows that CSR activities are

limited to Shariah principles only. However, in the Malaysian context, several things need to

be considered such as the fact that Malaysia applies a dual banking system, and that it has

diverse population consisting of Muslims and non-Muslims. Thus, by taking this point into

consideration, it is significant to ensure the sustainability of Islamic banks in Malaysia.

Besides, the theory and principles applied also vary, but most of the scholars include maqasid

al-shariah as the basis for undertaking CSR activities.

Conclusion

All in all, the analysis presented indicates that there are inconsistencies in the dimensions and

indexes of the Islamic CSR framework, not to mention the existence of various theories and

principles applied. Besides, Bani et al. (2015) add, even though scholars have included Shariah

principles as the basis for developing CSR dimensions and indexes, there is still no consensus

concerning which Shariah principle should be used. This is also agreed by previous scholars

who highlight that CSR concept still cannot be accepted universally (e.g., Bagire, Tusiime,

Nalweyiso, & Kakooza, 2011; Galbreath & Shum, 2012; Hou & Li, 2014), let alone the Islamic

CSR concept. This is in line with the literature that reports that the level of CSRD among

Islamic banks varies. This is due to the differences existing in the cultural, environmental, and

religious aspects (Aksak et al., 2016). Furthermore, previous literature also states that the

Malaysian government shows strong support to public companies, and private companies to

disclose CSR activities. However, currently in Malaysia, there is no Islamic CSR guideline

established specifically for Islamic banks. This proves the need to propose an Islamic CSR

guideline for the Islamic banks in Malaysia. As asserted by Tuhin (2014), Islamic banks should

strategize and select the appropriate CSR activities to ensure that their business can sustain

long-term.

Therefore, the researchers suggest that the Islamic CSR guideline should be formed

meticulously through several stages. Firstly, the Islamic CSR guideline should be reviewed in

light of the Malaysian banking context and by referring to the ‘urf tijari principle. The ‘urf

tijari principle is the common business practice that is acceptable by the Malaysian community,

and which does not go against the Shariah principles (BNM, 2018). Nonetheless, conventional

banking literature should also be reviewed due to the fact that Malaysia practises a dual banking

system and that the country consists of Muslim and non-Muslim population. As a matter of

fact, Franzoni and Allali (2018) found that Islamic and conventional CSR can be converged,

but the only difference is that Islamic CSR must emphasise religious responsibility. Secondly,

CSR dimensions and indexes are perceived important by the respondents as reported by Di

Bella and Al-Fayoumi (2016) and Marsidi et al. (2017). However, the respondents representing

the stakeholders came from different backgrounds and different countries. Therefore, other

stakeholders should be taken into consideration in conducting the survey of their perception of

CSR dimensions and indexes in order to satisfy their need and demand which can hence ensure the success of Islamic banks. This matter is important because different stakeholders have

varying expectations and experiences resulting in different outcomes (Wood & Jones, 1995).

Thirdly, the CSR dimensions and indexes should be validated by the qualified panels through

exploratory factor analysis (EFA) and confirmatory factor analysis (CFA).

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Appendix

Appendix A. The AAOIFI CSR standard No Types of disclosure Name of dimensions

1 Mandatory 1. Disclosure of policy on screening clients

2. Disclosure of policy on dealing with clients

3. Disclosure of policy on earning and expenditure

prohibited by Shariah

4. Disclosure of policy on employee welfare

5. Disclosure of policy on zakah

2 Voluntary 1. Disclosure of policy on social, development

and environment based investment quotas

2. Disclosure of policy on par excellence

customer service

3. Disclosure of policy on micro and small

businesses and social savings and investments

4. Disclosure of policy on qard hasan

5. Disclosure of policy on charitable activities

6. Disclosure of policy on waqf management.

Appendix B. Articles on CSR dimensions

No Author Name of dimensions No. of indexes Theories or principles

1. Franzoni & Allali

(2018)

1.Economic responsibility

2.Discretionary responsibility

3.Ethical responsibility

4.Legal responsibility

- AAOIFI (2010)

2 Hamidi & Worthington

(2018)

1.Prosperity

2.Planet

3.People

4. Prophet

- Maqasid al-shariah

3 Abu Bakar & Md

Yusof (2016)

Propose managerial guideline on

CSR management process from

an Islamic perspective

- Tawhidic, and Shariah

paradigm

Appendix C. Articles on CSR indexes No Author Name of dimensions No. of indexes Theories or principles

1 Hidayat&Alhur (2016) - 15 AAOIFI (2010)

2 MohdNor, Abdul

Rahim &Senik (2016)

- 7 Islamic moral economy

41

Appendix D. Article on CSR dimensions and elements No Author Name of dimensions Elements Theories or principles

1 Tarique et al (2018) 1.Necessities

Education,

health,

humanitarian and

disaster relief

Maqasid al-shariah

2. Complements Environment

3. Embellishment Sports and arts,

literature and

culture

APPENDIX E. Articles on CSR dimensions and indexes No Author Name of dimensions Indexes Theories/principles/reference

1 Kunhibava et al. (2018)

1. Islamic bank level

2. Central bank level

3.International level

9 Shariah principles

2 Platonova et al. (2018)

1. Mission and vision statement

2. Products and services

3. Zakah, charity and

benevolent funds

4. Commitment towards

employees

5. Commitment towards debtors

6. Commitment towards

community

56 Stakeholder theory/ AAOIFI

Standard No. 7; Haniffa &

Hudaib (2007); Aribi & Gao

(2012); Aribi & Arun (2015)

3 Sherif et al. (2018)

1. Employee welfare

2.Internal environment

preservation policy

3.Earning and expenditure

prohibited by Sharia

4.Par Excellence customers

services

5.Late repayments and insolvent

clients and avoiding

onerous terms

6.Qard Hassan

7.Micro and small business and

social saving and

investments and development

8.Screening and informing

clients for compliance

withIslamic principles

9.Zakah

95 Accountability/

Hassan & Harahap, 2010;

Farag et al., 2014; Aribi&

Gao, 2012; Maali et al., 2006;

Haniffa & Hudaib,2007;

Mohammed, 2007; Ullah &

Jamali, 2010; Williams &

Zinkin, 2010; Rashid et al.,

2013; Besar et al., 2009;

Kamla & Rammal, 2013)/

survey the Quran and Sunnah

to observe the main themes

for compliance with Shariah

accountability towards Allah

and also for social activities.

42

APPENDIX E. Continued No Author Name of dimensions No. of

indexes

Theories/principles/references

10.Charitable activities

11.Waqf management

12.Social responsibility

Validate the indexes with

academics and professionals

4 Yusoff et al. (2018)

1. Finance and investment

2. Products and services

3. Employees

4. Society

5.Environment

6. Corporate governance

43 AAOIFI’s (2010) underlying

CSR

responsibilities framework, and

the prevailing

literature/ Othman et al. (2009);

Bursa Malaysia (2007); Ousama

& Fatima

(2006); Sulaiman (2005), Haniffa

(2002); Baydoun & Willet (2000),

Kazemian & Mohd-Sanusi

(2015).

5 Ahmed & Elbelihy

(2017)

Ethical identity index by

Haniffa & Hudaib (2007)

77 Tawhid (unity), ‘Adl & Qist

(Justice, Equity and Equilibrium,

benevolence and excellence) and

Khalifah (Accountability,

Trusteeship and social

responsibility) by Haniffa &

Hudaib (2007)

6 Marsidi et al. (2017)

Employees, society and

environment

10 Legitimacy theory, stakeholder

theory, accountability

7 Mohd Nor (2016) 10 Islamic moral economy: Promote

Islamic social banking

43

APPENDIX E. Continued No Author Name of dimensions No. of indexes Theories/principles/references

8 Di Bella & Al-

Fayoumi (2016)

1. Islamic ethical system

2.Represented through profit

and loss arrangements

3.Embedded within the

principles behind financial

services provided by Islamic

Banks

4. Benchmarked by the AAOIFI

corporate governance

standard

9 Abduh & Al Ageely

(2015)

19 categories 95 based on the AAIOFI

corporate governance

standard for Islamic financial

institutions and CSR

disclosure

conduct and disclosure for

Islamic financial institutions,

OECD principles for

corporate

governance, Basel principles

for enhancing corporate

governance, and related

articles that

have developed social and

environmental disclosure

indexes

10 Aribi & Arun (2015) 1.Shariah compliance

2.Zakah

3.Charity

4.Qard hasan

5.Debtors

6.Environment

7.Employees

26 Rice 1999; Kamla et al. 2006;

Maali et al. 2006; Haniffa &

Hudaib 2007; Williams &

Zinkin 2010; Aribi & Gao

2010, 2012)

11 Belal et al. (2015) 1.Universal (89 items)

2.Particular (60 items)

149 Accountability/

Maali’s et al. (2006);

Haniffa & Hudaib’s (2007);

AAOIFI

12 El-Halaby &

Hussainey (2015)

1.Social responsibility

within the organisation

2.Social responsibility in its

relationship

3.Social responsibility in

screening its investment

12 Social accountability/

governance standard No.7

issued by the AAOIFI, and

previous literature.

44

APPENDIX E. Continued No Author Name of dimensions No. of

indexes

Theories/principles/references

4.Social responsibility in its

relationship with greater

society

13 Darus et al. (2014) 1.Social development

2.Education and awareness

3.Economic development

4.Health

9 Literature review and content

analysis, discussion with

researchers and practitioners,

drafting indexes, final review

indexes

14 Mallin et al. (2014) 10 dimensions 84 Slack resource theory, good

management theory

15 Khurshid et al. (2014)

1.Economic

2.Legal

3.Ethical

4.Philantrophic

16 Carroll, the Quran and the

Sunnah

45

APPENDIX F. Articles on CSR dimensions, elements and indexes No Author Name of dimensions No. of

indexes

Theories/principles/references

1 Darus et al. (2018) Dimensions and elements

1. Strategy (Corporate vision)

2. Governance (Board of

Directors and top

Management; Shariah-

compliant)

3. Product (Product, Services,

and Fair Dealing with Supply

Chain)

4.CommunityDevelopment and

Social Goals (Strategic Social

Development; Research,

Development, and Training)

5.Employment (Employees)

6. Environment (Environment)

78 unity (tawhid), vicegerency

(khalifah),

accountability, and justice/

AAOIFI (2005); Haniffa &

Hudaib (2004); Hassan &

Harahap (2010)

2 Amran et al. (2017) 1. Strategy (Corporate vision)

2.Governance (Board of

directors and top

management, Shariah

compliant)

3.Product (Product, services and

fair dealing with supply

chain)

4.Community development and

socialGoals (Strategic social

development, Research,

development and training)

5.Employment (Employees)

6.Environment (Environment)

78 Islamic accountability, ultimate

aim of protecting Maqasid al-

Shariah, legitimacy theory

adapted from the guidelines of the

AAOIFI (2005), Haniffa and

Hudaib (2004) and Hassan and

Harahap

(2010)

3 Alamer et al. (2015)

Dimensions and sub-dimensions

1.Human resource

-Protecting health and safety

-Investing in education and

training

-Responsible in work

-Justice

2.Good governance

-Vision and mission statement

-Board members and top

management

-Fair dealings

3.SSB

-SSB members and their roles

-Compliance with Shariah

115 Business process and outcome

oriented

/Islamic CSR literature

46

APPENDIX F. Continued No Author Name of dimensions No. of

indexes

Theories/principles/references

4.Environment

-Investment and finance

-In workplace

-Protecting the environment

5.Research and development

-Advancement of knowledge

-Innovation

6.Investment

-Affordable products and

services

-Empowerment of community

7.Social activities and sharing

-Alleviate social problems

-Support and help fund welfare

-Support charities

-Play the role of welfare without

looking solely for profitability

-Fair returns

-Achieve economic and social

goals

-Make awareness of Islamic

banks

4 Issalih et al. (2015) 1.Finance and investment

2.Employees

3.Product (consumer)

4.Environment

23 Maqasid al-Shariah

5 Darus et al. (2014) 1.Strategy

2.Governance

3.Product

4.Community development and

social goals

5.Employees

6.Environment

78 Legitimacy theory