Shariah Accountability Practices of Islamic Banks in Malaysia

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1. International Journal of Advanced Science and Technology Vol . 29, No. 14, (2020), pp. xx-xx Shariah Accountability Practices of Islamic Banks in Malaysia Rosnia Masruki*1, Nur Sakinah Binti Samsudin1, Bablu Kumar Dhar2 1,2 Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia 2 Faculty of Business, Daffodil International University, Bangladesh *1 rosnia@usim.edu.my; 2drbablu.ba@diu.edu.bd Abstract The study explores the concept of Shariah accountability, to promote transparency of Islamic Banks (IB) through Shariah disclosure by focusing on Shariah Committee report (SCR). This objective is achieved by using a quantitative method using a self-developed disclosure index, namely Shariah Disclosure Index (SDI). It was developed based on Bank Negara Malaysia (BNM) frameworks and guidelines, Accounting and Auditing Organisation for Islamic Financial Institution (AAOIFI) standards, Islamic Financial Supervisory Board (IFSB) regulations, and previous studies. Content analysis was conducted using the unweighted scoring method on seventy-five (75) annual reports from 2013 to 2017 for fifteen (15) IB in Malaysia to identify the level of SCR disclosure. The study findings show that the Shariah disclosure level of Malaysian IB only fulfills the minimum requirements by BNM, except for Bank Islam Malaysia Berhad (BIMB). Meanwhile, noted some IB disclosed the items under different headings in annual reports. Yet, there are few IB do not fulfil the minimum requirements of SCR disclosure. Thus, this study proposes a regulator to monitor SCR disclosure for IB, as specified by BNM and AAOIFI, since it is essential for conforming Shariah compliance. Keywords: Shariah accountability, shariah disclosure, shariah committee report, shariah disclosure index. 1. Introduction The Shariah Committee report (SCR) format is based on national the Shariah framework, and regulations. For example, BNM has issued a Shariah corporate governance framework and guidelines that illustrate the format of SCR. In Malaysia, BNM has made it compulsory on IB’s operating in Malaysia to prepare the SCR. The SCR needs to be included in the annual report, which serves as a source of transparency of IB’s and confirms that the IB’s conducts are according to Shariah principles. The Accounting and Auditing Organisation for Islamic Financial Institution (AAOIFI) also issued standards for preparing the SCR (AAOIFI, 1999). The disclosure elements between both frameworks differ because AAOIFI also makes the requirement for external Shariah audit that needs submit to the central bank. For example, Pakistan and Bahrain adopted AAOIFI (Abdel-Karim, 1999) in preparing guidelines for preparing SCR. Despite the importance of SCR as a statutory audit report, the format used by IB’s globally vary. Also, Malaysian IB’s have different styles of issuing despite using the same frameworks and guideline. The dissimilarity of format leads to problems as users cannot make a comparison. Moreover, if the IB lacks many elements in the SCR, it indicates weak Shariah compliance status and threatens the IB’s reputation. Indeed, the transparency of disclosure in the SCR should be examined because it is one of the leading platforms to identify whether the operations of IB’s are in line with the Shariah parameters. This reveals that IB’s are ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC 1
2. International Journal of Advanced Science and Technology Vol . 29, No. 14, (2020), pp. xx-xx held accountable for Shariah standards. As such, the IB’s should observe the best practices in reporting SCR to promote that they discharge their Shariah accountability wisely. The limited research examining SCR disclosure motivates this study. Indeed, this study. It attempts to include not only SCR format from BNM but also the international regulator AAOIFI. Upon that, IB’s operating in Malaysia is evaluated based on their level of SCR disclosure level. This study focuses on the Shariah Committee Report (SCR) in Islamic banks or financial institutions in Malaysia as the report is a mechanism that assures the IB’s Shariah compliance status. This study gains information on their disclosure in the SCR. This is measured using content analysis based on the Shariah Disclosure Index (SDI) developed from regulators guidelines, articles, and books. The samples are from the accessible annual reports of IB’s operating in Malaysia for five consecutive years from 2013 until 2017. The Islamic financial industry especially IB’s is expanding rapidly. This has led to the establishment of frameworks that function as references for IB’s include Shariah governance guidelines. In answer to the research questions, the study seeks to develop the Shariah Disclosure Index (SDI) for Islamic Banks in Malaysia; and to evaluate the extent of SCR disclosure among IB’s in Malaysia based on the self-developed disclosure index named Shariah Disclosure Index (SDI). 2. Literature Review The SCR contents and format follows the local standard and international standards such as SGF (BNM, 2010) for IB’s operating in Malaysia and GSIFI 1 (AAOIFI, 1999). In reality, the presentation varies although the IB’s use the same standard (ISRA, 2016 a,b). Abdullah (2011) found that the level of disclosure is still low because only a few banks disclose more than half of the items on the disclosure index of SCR. Therefore, studies have been conducted to identify the extent of SCR disclosure elements among the sampled IB’s. Puad et al. (2015) carried out a comparative analysis of SCR elements and scope between Malaysia, Pakistan, and Bahrain with one bank for each country and collecting annual reports for three years from 2012 to 2014. They found that each sampled banks lacked disclosure of some aspects but the sample from Pakistan had more disclosure items compared to Malaysia and Bahrain in terms of products, operations, activities, transactions, human resources development, Zakat calculation and payment, steps taken in ensuring Shariah compliance, and highlighting relevant disclosure also called volunteer disclosure that aims to boost user confidence. Khan (2016) found that human capital development information, Shariah Committee’s assurance on IB’s Shariah compliance status, Zakat contribution, and factors of Shariah related issues are important items that need to be disclosed. Mia & Al-Mamun (2009) agreed that the Shariah Committee’s assurance on Shariah compliance and human capital development information are critical. IB’s limit the items of SCR disclosure which cover basic format, and some do not even observe minimal disclosure items highlighted by the regulator (Abdullah, 2011). Zaki et al. (2014) ethical identity index (EII) included the vision and mission statements, BODs and top management, products and services, Zakat, charity and benevolent loans, commitment toward employees, commitment toward society, commitment toward debtors, and Shariah supervisory board for nine (9) Islamic banks from nine (9) Asian countries for five consecutive years. They found IB’s observe minimal information disclosure related to index items since the IB’s scoring fluctuated for each item. ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC 2
3. International Journal of Advanced Science and Technology Vol . 29, No. 14, (2020), pp. xx-xx Muhammad (2015) explored the disclosure of IB’s annual report for financial and non-financial issues including Shariah, social, and environmental issues. His findings show that IB’s do not have a standardised presentation. Only two (2) IB’s discloses the comprehensive financial report on Shariah non-compliance earning and expenses which only two IB’s disclose but did not comprehensively explain about factor and source of Shariah non-compliance happened and methods of mitigation. Rahman et al. (2014) found that the ethical disclosure of IB’s on Zakat, charity, products like a free-interest loan, community, environment, and Shariah Committee make IB’s different from a conventional bank. Harahap (2002), found only sampled IB from Indonesia did not follow specific Islamic regulator like AAOIFI and researcher also mention about disclosure on Shariah compliance, Zakat, and product. SCR disclosure has a minimum requirement set by regulators like BNM and AAOIFI, but studies performed by Rahaman (2015) and El-Halaby (2015) found that few sampled achieved full score while others prefer not to disclose certain items. Hassan et al. (2011) and Mohamad et al. (2016) stressed that the Shariah Committee should express quality opinion since it is a sign the IB’s is Shariah compliant. ElHalaby & Hussainey (2016) showed that majority from forty-three (43) IB’s have higher Shariah disclosure which complies AAOIFI standards. According to Rosman et al. (2017), IB’s tend to disclose general information about Shariah non-Compliance Income (SNCI). Hence, they suggest disclosing detailed information including factors leading to SNCI and its amount. More detailed disclosure is supported by Besar et al. (2009) since IB’s operation, and products become complex with time. Masruki et al. (2018, 2020) found that IB’s focus on Shariah Committee information disclosure rather than Shariah Review (SR), Shariah Risk Management (SRM) and Shariah Audit (SA) information. Therefore, this study includes SDI to identify IB’s that have voluntary disclosure for this component. The relevant disclosure items are discussed in the majority of previous studies. Those items are required by BNM and AAOIFI but IB’s did not disclose them comprehensively. Regulators should consider enforcing a standardise SCR presentation. The additional items such as human capital development, products and voluntary disclosure are important in SCR to portray the competency of IB’s in executing their operations. The knowledgeable users are expected to make IB’s easier to improve, particularly Shariah compliance. 3. Methodology This paper adopts realism along with the deductive approach. There are direct realism and critical realism (Saunders et al., 2009), and direct realism is appropriate for the study of Shariah disclosure level of IB’s since the expected result is the same as per the IB’s Shariah disclosure information that users acquire from the annual report. Population According to the BNM website, currently, Malaysia has sixteen (16) banks that offer Islamic banking products. The list of banks includes full-fledged Islamic banks and conventional banks that have Islamic windows. The current study covers all licensed Islamic banks in Malaysia as listed on the website of Bank Negara Malaysia as at 31 December 2018, irrespective of whether they are local or foreign Islamic banks (please refer to Table 1). From the website of BNM, there are eleven local IB’s while the remaining five are foreign IB’s. However, MBSB Bank Berhad has been excluded as the organisation is not granted a banking license, but the Minister of Finance granted them to operate as a ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC 3
4. International Journal of Advanced Science and Technology Vol . 29, No. 14, (2020), pp. xx-xx financial institution and to assure consistency the of the result. The information collected for the years from 2013 until 2017. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Table 1: List of Islamic Banks Name Affin Islamic Bank Berhad (AIBB) Al Rajhi Banking & Investment Corporation (Malaysia) Berhad (ARBICB) Alliance Islamic Berhad (AIB) AmBank Islamic Berhad (ABIB) Bank Islam Malaysia Berhad (BIMB) Bank Muamalat Malaysia Berhad (BMMB) CIMB Islamic Bank Berhad (CIMBIBB) HCBC Amanah Malaysia Berhad (HSBCAMB) Hong Leong Islamic Bank Berhad (HLIBB) Kuwait Finance House (Malaysia) Berhad (KFHB) MBSB Bank Berhad (MBSBBB) Mayabank Islamic Berhad (MBIB) OCBC Al-Amin Bank Berhad (OCBCAABB) Public Islamic Bank Berhad (PIBB) RHB Islamic Bank Berhad (RHBIBB) Standard Chartered Saadiq Berhad (SCSB) Ownership Local Foreign Local Local Local Local Local Foreign Local Foreign Local Local Local Local Local Foreign Source: BNM, 2018 retrieved on December 31, 2018. Research Instruments This is quantitative research whereby the research uses numerical for measurement to analyse the results (Zikmund et al., 2009). It aims to measure the IB’s Shariah disclosure through content analysis as used by El-Halaby (2015) and Masruki (2016) in studying Shariah, social and financial (SSF) disclosure, and financial and non-financial disclosure. Prior to the analysis, the self-developed disclosure index is proposed based on the related regulations and guidelines issued by BNM, AAOIFI, IFSB, ED 2017 and relevant studies on SCR and Shariah disclosure. Those items are validated with the help of experts such as Shariah Committee members and academicians. The method also used by Rahman et al. (2014) and Masruki et al. (2018a) to examine the disclosure. According to Sekaran (2003), the research instrument is valid when it can measure the concept of research. For this study, disclosure index adopted. The reliability of the instrument is when the instrument consistently measures the research concept (Sekaran, 2003). To measure the reliability of the instrument, a pilot test conducted as in Masruki (2016). The pilot test performed on IB’s 2013 Shariah disclosure in the annual report is compared with previous studies. The index is reliable if the score difference is insignificant. Disclosure content analysis uses a scoring method that called unweighted index (Dhar et al., 2017; El-Halaby, 2015; Masruki, 2016). The disclosure items available or mentioned in the annual report is scored ‘1’ and unavailable disclosure index item is scored ‘0’. Data Collection Procedure This study uses secondary data from the respective websites of IB’s, collecting five (5) year annual reports from 2013 to 2017. Data collection was carried out in December 2018. The SCR and Shariah governance information are extracted from the annual report for analysis. ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC 4
5. International Journal of Advanced Science and Technology Vol . 29, No. 14, (2020), pp. xx-xx 4. Findings and Analysis Shariah Disclosure Practices by Islamic Banks This subtopic discusses IB’s compliance with SCR disclosure. Hence, Figures 1 summarises the disclosure level of IB’s every year. 100 90 80 70 60 50 40 30 20 10 0 2013 2014 2015 2016 2017 Figure 1. SCR Disclosure Level by IB’s from 2013-2017 Figure 1 shows that the distribution of disclosure level of SCR by IB’s in 2013 is not significantly different which range from 35% to 60%. CIMB Islamic Bank achieved the highest percentage (71%) of SCR disclosure. This indicates that IB’s still becoming familiar with the adoption of the SGF requirement for SCR disclosure since it becomes compulsory in 2011. The SCR disclosure percentage range recorded no difference in 2014 from 30% to 60 %. In this year Bank, Islam Malaysia Berhad (BIMB) recorded the most SCR disclosure, which likely covers minimum requirement from BNM and other Shariah governance items highlighted in SGF 2010. The lowest Shariah disclosure score was Bank Muamalat Malaysia Berhad (BMMB) with 32%. Despite the low percentage of SCR, some IB’s took the initiative to disclose Shariah governance items in different heading like AMISlamic Bank Berhad, and Maybank Islamic Berhad. The effort by IB’s to improve Shariah disclosure seen in 2014 but IB’s should consider disclosing under one heading like BIMB to make it convenient for users or readers. SCR disclosure in 2015, there is a slight decrease for some IB’s, which are Al Rajhi Banking and Investment Corporation (Malaysia) Berhad (Al Rajhi), and Alliance Islamic Bank (AIB). Al Rajhi is a foreign IB’s and there is the possibility of being influenced by regulations from the regulator at the home country. Moreover, these IB’s did not disclose many Shariah items even under different headings. These IB’s should consider improving the Shariah disclosure level since people are unfamiliar with IB’s. Still, BIMB takes the lead for being transparent concerning matters of the Shariah. In 2016, BIMB still leads for the SCR disclosure level and only three IB’s are above 50% of SCR disclosure which are AMIslamic Bank Berhad (AMIslamic), CIMB, and Kuwait Finance House (Malaysia) Berhad (KFH). Other IB’s disclosure still does not achieve half of the Shariah items highlighted in the framework, guidelines and prior studies. Some IB’s disclose those items under different headings. In 2017, the percentage of disclosure among IB’s still does not have material difference except BIMB (92%). The majority at range 30% of the Shariah items disclosure and only a few IB’s tries to disclose Shariah items under one heading. Four (4) IB’s disclose half of Shariah items in SDI, which are Alliance, CIMB, HLIB, and OCBC. ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC 5
6. International Journal of Advanced Science and Technology Vol . 29, No. 14, (2020), pp. xx-xx Shariah Disclosure Practices by Items This subtopic discusses Shariah disclosure items that IB’s should present in SCR since they are highlighted in local and international framework, guidelines, and standards. Previous studies stressed the items that supposed to be disclosed and voluntary information disclosure that is important as disclosure items. The analysis looks for trends of disclosure items from 2013 to 2017 to identify frequent items and less important items viewed by IB’s that summaries in Table 2. Table 2: Summary of Shariah Disclosure Practices by Items Descriptions/Years 2013 2014 2015 2016 Opening: Title of Report Purpose of the Engagement Addressee / Readers Management Responsibilities/Task in ensuring Shariah compliance status: Observing Shariah Rules Implementation in IB's Provide Adequate Budget Allocation Provide Adequate References (Rules) Provide Human capital Development Programs: Number of Training Attendance of Employees Trainings & Developments Mainly on Shariah and Finance Scope Part: Shariah Committee establishment Shariah Review: Examine and evaluate IB's Shariah compliance status Take remedial actions for Shariah noncompliance issues / avoid reoccurrence Shariah audit: Internal independent assessment for ensuring Shariah compliance: financial statement (n/a) Internal independent assessment for ensuring Shariah compliance: Shariah governance (SC, SA, SR, SRc & SRM) Internal independent assessment for ensuring Shariah compliance: IB's activities Shariah Risk Management: Identifying, measuring, controlling, monitoring and mitigating Shariah non-compliance risk Suggest Shariah non-compliance risk management policies Shariah Research: Studies about Shariah issues Studies about new products prior launch into market Shariah Committee Opinion: Assurance statement on contracts, transactions and dealings are Shariah compliance Assurance statement on profit distribution of investment accounts appropriate to Shariah rules: ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC 2017 100% 100% 7% 93% 100% 100% 20% 93% 100% 100% 20% 100% 100% 100% 20% 93% 100% 100% 33% 100% 93% 0% 13% 27% 7% 7% 27% 93% 0% 13% 33% 13% 13% 27% 100% 0% 7% 13% 7% 7% 13% 93% 0% 0% 13% 7% 7% 13% 100% 0% 0% 13% 7% 7% 7% 100% 100% 47% 100% 93% 73% 100% 93% 87% 100% 93% 73% 100% 93% 73% 0% 20% 7% 0% 7% 87% 0% 87% 7% 87% 0% 87% 7% 87% 7% 0% 7% 7% 7% 7% 7% 20% 13% 13% 13% 27% 20% 20% 13% 20% 13% 13% 13% 13% 7% 13% 0% 7% 7% 7% 7% 7% 0% 13% 7% 7% 20% 7% 13% 13% 0% 7% 13% 13% 7% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 6
7. International Journal of Advanced Science and Technology Vol . 29, No. 14, (2020), pp. xx-xx Descriptions/Years Implemented policies for Restricted & Unrestricted Investment Account Holder (IAH) Assurance statement on Zakat payment Assurance statement on following Shariah principles, national regulations and Shariah Governance Framework Assurance statement on non-Shariah compliance income disposed to charity Charity amount Closing: Two (2) representative of Shariah Committee signature Date of Report Others: Shariah non-compliance issues: Nature of Shariah non-compliance Number of Shariah non-compliance issues Contracts & Agreements (Products) 2013 7% 2014 0% 2015 7% 2016 13% 2017 13% 93% 100% 87% 80% 87% 87% 93% 93% 93% 93% 87% 100% 100% 100% 100% 40% 40% 33% 40% 27% 93% 100% 100% 100% 100% 100% 100% 100% 100% 100% 33% 33% 27% 7% 33% 27% 27% 13% 47% 47% 47% 13% 33% 33% 27% 7% 33% 33% 27% 13% Table 2 listed all Shariah items highlighted in the framework, guidelines, and standards of Shariah governance locally and internationally along with the findings of prior studies. The results in Table 2 shows that the items that have the highest percentage are minimum requirements by the regulator. The required items that did not achieve full scores indicates that some IB’s did not fulfil the basic condition. The IB’s that did not disclose the required items should upgrade the quality of disclosure to at least meet the minimum requirements as users can compare the report between IB’s and it would foster confidence. Moreover, regulatory requirements are already considered information needed by customers. Voluntary disclosure is also identified. The score is not high, but it shows that the IB’s that have this approach have a sense of responsibility to be transparent to their customers. The items include Shariah issues factor and number of Shariah cases, product contracts and agreements, human capital development information, and Shariah governance information. The result is low since it focuses on disclosure in SCR, but a few IB’s make voluntary disclosure for items under a different heading. In conclusion, the majority of IB’s try to maintain the minimum requirements of Shariah disclosure in SCR except for BIMB. This shows that no improvements have been made by these IB’s in enhancing their Shariah transparency. However, some IB’s disclose the information under different headings. In addition, some IB’s make voluntary disclosure for Shariah non-compliance issues, mitigation, and human capital development information. Summary of SCR Disclosure by Islamic Banks Table 3: Summary of SCR Disclosure by Islamic Banks Islamic Banks and Years 2013 2014 2015 2016 2017 Affin Islamic Bank Berhad 50% 47% 53% 39% 45% Al Rajhi Banking and Investment 42% 37% 34% 34% 34% Corporation (Malaysia) Berhad Alliance Islamic Bank Berhad 39% 55% 47% 45% 53% AMIslamic Bank Berhad 37% 42% 53% 50% 42% Bank Islam Malaysia Berhad 55% 82% 87% 87% 92% Bank Muamalat Malaysia Berhad 45% 32% 32% 32% 32% ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC Overall 47% 36% 48% 45% 81% 34% 7
8. International Journal of Advanced Science and Technology Vol . 29, No. 14, (2020), pp. xx-xx Islamic Banks and Years CIMB Islamic Bank Berhad HCBC Amanah Malaysia Berhad Hong Leong Islamic Bank Berhad Kuwait Finance House (Malaysia) Berhad Maybank Islamic Berhad OCBC Al-Amin Bank Berhad Public Islamic Bank Berhad RHB Islamic Bank Berhad Standard Chartered Saadiq Berhad Overall 2013 71% 37% 58% 37% 2014 55% 34% 53% 34% 2015 66% 39% 53% 37% 2016 61% 39% 45% 34% 2017 53% 37% 55% 34% Overall 61% 37% 53% 35% 42% 47% 39% 37% 37% 45% 45% 63% 45% 39% 39% 47% 39% 53% 42% 39% 39% 48% 39% 53% 42% 39% 39% 45% 39% 50% 45% 39% 39% 46% 41% 53% 43% 39% 39% -- Table 3 shows that Shariah disclosure by IB’s in SCR was inconsistent from the years 2013 to 2017. BIMB made efforts to make it easier for users by disclosing the items under one heading. Affin Islamic Bank Berhad (Affin), CIMB, KFH, and Hong Leong Islamic Bank Berhad’s (HLIB) disclosure performance fluctuated each year. Other IB’s have consistent Shariah disclosure percentage. 5. Discussions Shariah disclosure requirement is still new in Malaysia. It is expected that improvements come with time. Disclosure index content analysis (El-Halaby, 2015; Masruki, 2016; Masruki et al., 2018 a,b) is one approach to identify the performance of IB’s in disclosing the information. Also, users can compare and question the IB’s transparency. Potential financial investors should study IB’s financial performance to make a comparison between the most transparent IB and least transparent IB. The study findings show that most IB’s did not disclose Shariah items under SCR. Hence, this study suggests that IB’s should present those items under the same heading for the convenience of users and readers. Furthermore, IB’s did not disclose the minimum requirements which should be their main focus to improve the quality of transparency. Some IB’s practice voluntary disclosure on Shariah non-compliance issues, human capital development, and Shariah governance component which are Shariah Review (SR), Shariah Audit (SA), Shariah Risk Management (SRM) and Shariah Research (SRc). Other IB’s should consider disclosing these items especially Shariah non-compliance issues. As for the external financial audit report, the key audit matters in auditor’s opinion should emphasise the significant issues identified during the audit process (IFAC, 2015). These should have a place in SCR called as Shariah key matter to stress the issues and solution. By doing so users can note that IB’s trying to solve issues, and not blindly accuse that IB’s of not taking action to solve the problem and preventive steps to avoid it occurring in the future. Quality Shariah compliance operation requires competent human capital. As such, Khan (2016) mentioned that human capital development information disclosure is important. Human capital development information should disclose the type of training, a number of participants involved, and a number of training being held to show the IB’s are serious in ensuring its Shariah compliance by having skilful manpower especially IB’s that operate as Islamic window. Shariah governance people including SR, SA, SRM, and SRc should be present in SCR as they are the main people working to ensure IB Shariah compliance. ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC 8
9. International Journal of Advanced Science and Technology Vol . 29, No. 14, (2020), pp. xx-xx 6. Conclusions This study measured the Shariah disclosure level by IB’s in Malaysia by developing the Shariah Disclosure Index (SDI) derived from local and international regulations along with previous studies. The index has been reviewed by three experts. The sample included seventy-five (75) annual reports of fifteen (15) IB’s from the year 2013 until 2017. The findings show that most IB’s have low Shariah transparency for the first three years. Nevertheless, there have been improvements by certain IB’s in the following years but the majority of IB’s did not disclose more than the minimum requirements across the seven years from 2011. This study has limitations. Few studies specifically discussed the level of Shariah disclosure by developing the index, and mostly focus on compliance, make a comparison between banks and focus on one year. This study only focused on IB’s compliance and did not portray the benefit of transparency by studying the relationship between Shariah disclosure and IB’s performance. The self-developed disclosure index should undergo a validation process since this study’s SDI was validated only by three (3) experts. Future study should be expanded in terms of measuring the quality of information presented, its impact on IB’s performance, and include a larger sample from around the world in order to produce comprehensive conclusion for Shariah disclosure that could benefit many parties including regulator, IB’s, and customers. Overall, the study indicates that Shariah disclosure can be upgraded (Puad et al., 2015). Malaysia is an Islamic finance hub and BNM should ensure the IB’s operating in Malaysia conform with regulations to be an example for other countries besides ensuring the compliance of IB’s. References [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] AAOIFI, A. (1999). Governance Standard for Islamic Banks No. 1 - Shari’a Supervisory Board: Appointment, Composition and Report. AAOIB. Abdel-Karim, R. A. (1999). Accounting and Auditing Standards for Islamic Banks. The Second Harvard University Forum on Islamic Finance: Islamic Finance into the 21st Century (pp. 239 - 241). Harvard University. Abdullah, M. R. (2011). Development of Islamic Banking in Malaysia. Kuala Lumpur Regional Centre for Arbitration (KLRCA) newsletter. Besar, M. H., Sukor, M. E., Muthalib, N. A., & Gunawa, A. Y. (2009). The Practice of Shariah Review as Undertaken by Islamic Banking Sector in Malaysia. 1 - 13. BNM, I. B. (2010). Shariah Governance Framework for Islamic Banks. Kuala Lumpur: BNM. BNM. (2018). Financial Stability. Retrieved December 31, 2018, from Central Bank of Malaysia: Dhar, B. K., Masruki, R., Mutalib, M., Rahouma, H. M., Sobhani, F. A., & Absar, M. M. N. (2018). Mediating Effect of Organizational Commitment Between Islamic Human Resource Practices and Organizational Performance Among Islamic Banks of Bangladesh. The Journal of Muamalat and Islamic Finance Research, 54-65. El-Halaby, S. I.-R. (2015). Accountability Practices of Islamic Banks: A Stakeholders' Perspective. Plymouth University. Harahap, S. S. (2002). The Disclosure of Islamic Values - Annual Report: The Analysis of Bank Muamalat Indonesia's Annual Report. IQTISAD Journal of Islamic Economics, 35 - 45. IFAC. (2015). Intenational Standard on Auditing 701: Communicating Key Audit Matters in Independent Auditor's Report. International Federation of Accountants (IFAC). ISSN: 2005-4238 IJAST Copyright ⓒ 2020 SERSC 9
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