Shari’ah compliance in Islamic banking

Whether Shari`ah Compliance Efficiency a Matter for the Financial Performance: The Case of Islami Bank Bangladesh Limited

Purpose- Shari`ah is the foundation of Islamic banks. Though all the Islamic banks required complying the Shari`ah requirements fully but the level of compliance differs among the Islamic banks. At the same time, Islamic banks have been performing well, but all of them are not demonstrating similar financial performance. This paper endeavored to explore whether Shari`ah compliance efficiency makes any difference in financial performance of Islami Bank Bangladesh Limited (IBBL). Design/ methodology/approach- This study used IBBL as a case. For exploring the issue of study, this paper applied e-mail interview approach and interviewed 24 interviewees including financial analyst, IBBL clients, and executives of regulatory bodies, IBBL, other Islamic and interest-based traditional banks. Interview opinions are then analyzed and interpreted for a deeper understanding of the topic. Findings- The study observed that some other factors have influences on the financial performance of IBBL, but the level of Shari`ah compliance is the dominant instinct in acquiring leading position. Superior Shari`ah compliance creates lots of internal strengths and external opportunities that facilitate IBBL in achieving loftier financial performance. Most of the interviewees argued that Shari`ah be the only disposition that makes IBBL unique. Moreover, the bank that follows more Shari`ah gets better financial outcomes. Research limitations- The study used a qualitative method using interview responses only for evaluating the relationship between Shari’ah compliance and financial performance. Further study may be conducted based on quantitative approach. Social implications- This paper expects to uphold the significance of Shari`ah in swelling the financial performance of IBBL and simultaneously motivating the parties relating to Islamic banks in enhancing the level of Shari`ah compliance. Moreover, this study provides new insights into the important of Islamic banks and their performance in relation to the choice of customers. Originality/value- This study explores the significance of Shari`ah compliance in creating avenues for greater financial performance and develops a model showing the ways how Shari`ah compliance leads Islamic banks in achieving the haughtier financial position. Whether Shari`ah Compliance Efficiency a Matter for the Financial Performance: The Case of Islami Bank Bangladesh Limited.