Performance of Islamic Financial Services 231
in Shari’ah, they must serve as active engines of social change rather than
indifferent producers of limited and coincidental positive externalities. In
this respect, IFIs should pay due attention to corporate social responsibility
(CSR) and must constitute social objectives over and above the basic legal
and ethical requirements mandated by Shari’ah.
Research on the evolution and the performance of Islamic fi nance has
tended to highlight issues of profi t and effi ciency, while downplaying or
ignoring the socio - political goals of the discipline and its practitioners.
Sairally (2007) undertook a unique study to evaluate the corporate social
performance (CSP) of IFIs in order to determine how socially responsible
they are in their objectives, actions, and commitments. This study made the
following observations:
■ (^) In contrast to their counterparts, IFIs have tended to engage in a strictly
“defensive” approach to CSR. While they ranked screening of objec-
tionable products, such as those that engage in riba and other impermis-
sible acts, very high on their list of priorities, they ranked the selection
of positive products, such as investment in companies that contribute
positively to society or invest in environmentally - friendly activities, very
low. An analysis of the mission and vision statements of the IFIs revealed
that the majority (41 percent) embraced such a defensive approach to
CSR, while only 27.8 percent engaged in a more proactive practice.
■ (^) The reported practices of IFIs displayed minimal or no commitment
towards ethical employment policies and community involvement.
■ (^) Most IFIs restricted charitable activities to direct donations (of about
0–2 percent of profi ts) to charities and community causes. Although,
this appears unexpectedly low, one possible reason could be reluctance
on the part of IFIs to make such claims public, following a policy that
charitable activities should be kept discreet. This is consistent with the
results of the survey which showed that 87.5 percent of respondents
failed to allocate a percentage of profi ts to the community activities in
which their institutions participated.
Grais and Pellegrini (2006) observed that although there was a notice-
able consistency in respecting the social obligations of Islamic fi nance, the
emphasis by IFIs on their social role was not uniform. In a sample of 13
IFIs, the study found that all discharged their almsgiving duties (zakat) as
required of all responsible corporate citizens by the Shari’ah. The major-
ity also provided charitable loans (qard - ul - hassan) to help disadvantaged
groups meet social obligations. The activities fi nanced included the imple-
mentation of development and humanitarian programs, the construction
of hospitals and mosques, and the fi nancing of education, house refurbish-
ments and in - kind donations. In general, the study found that IFIs live up to
their social goals as claimed in their mission statements.
Any problems regarding a lack of transparency in providing informa-
tion or with the mediocre standards of community involvement displayed by