A FRAMEWORK FOR CORPORATE SOCIAL RESPONSIBILITY IN ISLAMIC FINANCIAL INSTITUTIONS: THEORY AND EVIDENCE FROM GCC REGION

Abstract

The present research addresses the need for the development of a framework for implementing the Islamic CSR of IFIs that exist in conventional economies (i.e. mainly capitalism). The literature review reveals that CSR has never existed in any economic system other than capitalism, and that in spite of the fact that CSR has been based on various theoretical groundings, the ontological worldview of capitalism (mainly economic selfish man) and the epistemological considerations (mainly value-free scientific economic laws used in the production of knowledge) have influenced the understanding of CSR. Thus, the CSR literature fails to address mismatches between the micro objectives of businesses and the macro objectives of society.
Such mismatches are, however, taken into account in the Islamic theory of maqasid al-Sharia (Sharia objectives) and the Sharia jurisprudence method which facilitate the production of Sharia rulings through which a balance between micro and macro objectives is achieved. Thus, the present research aims to develop a framework for implementing Islamic CSR (ICSR) for IFIs, based on a built-in compliance with Sharia objectives and where Sharia objectives are achieved through the managerial implementation of Sharia jurisprudence. Four theoretical gaps in the literature on ICSR have been identified: (1) justification of the usage of the frameworks and models of conventional CSR on the basis of the Islamic worldview and epistemology, which are fundamentally different from those of capitalism; (2) the specification of methodologies appropriate to the Islamic worldview and epistemology; (3) the design of a framework for implementing Islamic CSR; and, (4) the design of a framework for measuring Islamic CSR.
It is found that creating an innate ICSR framework is not an end in itself, but instead aims to achieve Sharia objectives that represent the socio-political economic objectives of society and businesses, and thus international CSR frameworks are used after adjusting them to the Islamic worldview and epistemology. Furthermore, the PDCA (plan, do, check act) cycle is deployed to implement the Sharia jurisprudence method underlying a managerial framework of implementing and measuring ICSR.
The ability of the developed ICSR framework to describe reality has been empirically proven by testing nine null hypotheses against data collected from Sharia employees in IFIs in the Gulf Cooperation Council (GCC) region. Moreover, several statistical patterns are identified regarding the survey respondents’ levels of knowledge of maqasid al-Sharia and conventional CSR, and the influence of organisational and individual differences on both levels of knowledge and the implementation of ICSR.