Assessing the performance of Islamic banks in Malaysia based on balanced scorecard (BSC) measures and Shari'ah guidelines compliance

Abstract

Purpose

Islamic banking sector is gaining popularity globally. However, in recent decades, Malaysia's Islamic banking sector has been reckoned as an influential force in the global economy and became a rapidly growing industry. In fact, the international banking industry has admitted Malaysia as the leading Islamic banking center with the most progressive and attractive planning, strategic directions of development, and numerous incentives for nurturing this sector. Hence, this paper aims to evaluate the performance of Islamic banks in Malaysia based on Balanced Scorecard (BSC) measures and Shari'ah Guidelines Compliance.

Design/methodology/approach

To achieve the objectives of this paper, BSC performance evaluation system and Shari'ah Guidelines Compliance were used based on the data collected through an online poll survey across Malaysian Islamic banks from an aggregate of 994 information focused on 71 items, using 14 respondents in which ten were from the regional level and four were from the headquarters of the bank. Furthermore, nine respondents were bank managers and five were bank employees.

Findings

The findings of the paper are as follows: First, there is a useful connection among BSC estimates, attributes of Shari’ah Compliance and Islamic banks' performance. Second, tremendous improvement has been seen in the Malaysian Islamic banks, which used both the BSC measures and Shari'ah Guidelines Compliance.

Practical implications

The practical implication of the findings is that utilizing the BSC count and Shari’ah consistence characteristics; Islamic banks can better their exhibition and therefore, the banks ought to receive the recorded down rules alongside the BSC measures and Shari'ah ascribes to accomplish a superior presentation, benefit and achievement of Islamic currency advertise.

Originality/value

The novelty/originality of this paper can be seen from the fact that despite the BSC becoming a widely used performance management tool; still, there is a deficiency of standardization between a company and its perception of the term BSC and also mostly, research works on BSC were carried out on the United States- and European-based organizations, but in Malaysia, nothing more was done, especially in the Islamic banking sector, while this model is capable of covering both economic and non-economic estimate of presentation and therefore, considered as a sophisticated presentation computation system for performance evaluation.

Citation

Abueid, R. (2022), "Assessing the performance of Islamic banks in Malaysia based on balanced scorecard (BSC) measures and Shari'ah guidelines compliance", International Journal of Emerging Markets, Vol. 17 No. 7, pp. 1700-1719. https://doi.org/10.1108/IJOEM-11-2020-1412