A shari`ah perspective of corporate social responsibility and its application in Islamic banks in Malaysia

Abstract

All the world’s top multinationals engage in corporate social responsibility (CSR) in some form or other. There is almost no country in which business has not taken up the challenge of CSR in some way. Islamic banks which are also part of the business community and simultaneously guided by Shari‘ah principles, face even more expectations in performing CSR as Islamic institutions. Although Malaysia is at the vanguard of the development of Islamic finance, there is no special CSR framework which has been devised to guide Islamic banks on CSR implementation. Probably, that is why there are so many “versions” of CSR practice in Islamic banks in Malaysia since there is no standard framework thus far. Therefore, the objectives of this study are to determine the status of CSR concepts and applications from the Shari‘ah legal perspective, to ascertain the extent of Shari‘ah compliance of CSR applications, and to propose a standard CSR framework that is balanced and comprehensive for Islamic banks’ best practices. This Shari’ah qualitative research utilised two types of research methodology, namely descriptive analysis and empirical analysis. Based on the comprehension and the deduction process from the primary sources (al-Qur’an and al-Sunnah) and supported by classical and modern fiqh books, the analysis found that CSR is based on the khalifah concept and Islamic banks in Malaysia have the legal entity to perform CSR. The results of Shari‘ah analysis also indicate that CSR applications of Islamic banks have mixed rulings which cover obligatory, highly recommended, and recommended CSR activities. In the empirical analysis, interviews, observations and document reviews have been employed as triangulation instruments in collecting data regarding the current CSR applications. Among the most significant finding is that the majority of the research participants felt that Islamic banks should have a special CSR framework. Finally, an Islamic CSR framework for Islamic banks’ best practices was successfully proposed.