Corporate social responsibility index for islamic banks in the Kingdom of Saudi Arabia

Abstract

Islamic banking operations are widely accepted in Islamic society as the transactions are guided by Islamic principles and Shariah values. Although Islamic bank transactions are in compliance with the Shariah, all aspects of corporate social responsibility (CSR) in the Islamic banking industry have not been met. The current study investigated the limitations of existing indices to measure CSR practices in Saudi Arabia Islamic banks. Existing indices are either unable to measure actual CSR practices or do not cover all aspects of these practices in the Islamic banks. There is a need to understand the limitations of existing indices. In this study, CSR in these banks is categorised into two broader scopes: business process dimensions and oriented outcome dimensions. Selective elements to construct an appropriate CSR Index (CSRI) to measure all aspects of CSR practices for both scopes have been assigned weights in accordance with existing studies. Unstructured interviews with practitioners from selected Islamic banks as well as secondary data from annual reports and documents were used to develop this index, which was empirically tested to explore real CSR practices. Based on the developed CSRI that gave oriented outcome dimensions less weight than business process dimensions, and content analysis of annual reports and documents of Islamic banks, the findings indicated that these banks had weak CSR practices. Therefore, it is recommended that this developed CSRI be provided as a guide for Islamic banks in the Kingdom of Saudi Arabia to improve their CSR practices.