SUSTAINABILITY ASSESSMENT OF PAKISTANI ISLAMIC BANKING INDUSTRY AND ITS IMPACT ON THE ACHIEVEMENT OF MAQĀSID-ALSHARI’AH

Abstract

Purpose:
Islam's concept of development places a strong emphasis on both individual and societal welfare, going beyond only material advancement. The socio-economic agenda should be Islamic banks’ strategic objective to establish their 'Islamic moral economy' nature. Islamic banks could not be considered to meet the Islamic moral economy requirement of substance beyond formoriented Shari'ah compliance if they do not incorporate social and ethical dimensions into their business strategy. However, there have been significant criticisms raised against Islamic financial institutions' failure to meet the social demands of society. Due to the significance of Maqāsid-al- Shari'ah for Islamic banks and complaints made against them for failing to uphold their social obligations, it is necessary to investigate their Maqāsid based role. It is necessary to do an empirical investigation of Islamic banks' contributions to promote economic growth, stability, and well-being and the factors that determine successful implementation of Maqāsid-al-Shariah should be given significant consideration and rigorous analysis.
Methods:
The study has employed disclosure theories to establish a link between sustainability practices and Maqāsid-al-Shari’ah-based ethical performance. The research has aimed at sustainability assessment of the Islamic banking industry and investigating the impact of sustainability practices on Maqāsid-al-Shari’ah performance of Islamic banks in Pakistan. The annual reports of Pakistani Islamic bank are scrutinized for the information using content analysis technique. The primary source of data are the banks’ annual reports. The period of research is from 2010-to 2019. The TOPSIS (Technique for Order Preference by Similarity to Ideal Solution) technique is used to assess the banks' sustainability performance in this study. Finally, regression analysis has been carried out to investigate the impact of sustainability practices on Maqāsid based role.
Results:
It is found that economic, financial sustainability and governance practices can help towards Maqāsid-al-Shari’ah achievement by Islamic banks.

Novelty:
The Islamic banks’ performance evaluation frameworks are heavily weighted toward financial considerations. The literature has evidence on the fact that Islamic banking performance is being assessed using models of the commercial banking system. Only a few studies have examined how Maqāsid-ul Shari'ah can be used in practice, despite the fact that Islamic banks performance
standards are moral. There is a significant research gap regarding performance evaluation based on Maqāsid and the factors that contribute to their Maqāsid-based role, the study has aimed to fill this research gap.