Islamic banking: issues of governance, transparency and standardization

Faizullah, Mohammed (2009) Islamic banking: issues of governance, transparency and standardization. Doctoral thesis, London Metropolitan University.


This dissertation explores the corporate and Shariah governance of Islamic banks and the utility function of customers. The core requirement of Islamic banks is to provide financial services in accordance to Islamic Shariah Law. However, the fact that Islamic banks are also able to offer any financial services, which conventional banks are also offering, raises the question of their compliances to Shariah law and their transparency.
A mixed method of research, combining a case study approach in addition to customers' survey, was adopted to examine the banking services and investigate customer satisfaction. Three major Islamic banks in Bangladesh were selected in order to examine their practices, and a total of over four hundred customers of various Islamic banks in Bangladesh participated in the study by responding to questionnaires. Customers' surveys were also conducted in Malaysia, Dubai and in the United Kingdom with nearly six hundred returned samples from all four countries being analysed.
To determine the factors which are associated with the 'Satisfaction of Islamic banking services' (dependent variable), crosstabulation (bivariate), multiple logistic regression and ordered (ordinal) multiple logistic regression analyses were employed. The results of multiple logistic regression and ordinal logistic regression express the likelihood of satisfaction, adjusting for all significant variables included in the model.
The results from logistic regression analysis showed that 'satisfied with Islamic products and transparency' had relatively strong associations with the 'satisfaction of Islamic banking services'. The logistic regression coefficients indicate that customers satisfied on 'Islamic products and services' hold a belief that these banks are transparent and are likely to be satisfied with Islamic banking services compared to others. The results show that the risk of non compliance to Shariah law is very high and that customers are very sensitive to this issue.

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