Revisiting the Index to Measure Maqasid al-Shariah Oriented Performance of Islamic Banks: Evidence from Pakistan

Abstract

In the context of fulfillment of maqasid al-Shariah, Islamic banks’ performance has been measured by some researchers by adding many dimensions and elements to the five objectives of Shariah, and resultantly many indices have been developed. However, these dimensions and elements are either not comprehensive, or not relevant. The objective of the present study is to provide an improved maqasid al-Shariah oriented performance index that includes all the five objectives of Ghazali’s theory of maq¯as. id al-Shar¯ı‘ah, namely protection of faith, life, intellect, family and wealth. Additionally, the present study proposed more reflective measures to assess maq¯as. id oriented performance including share of financing based on non-controversial modes and percentage of value added that is distributed to various stakeholders. The study applied Sekaran’s behavior science method and applied social accounting concept of value added statement and service profit chain as a logic to develop maq¯as. id index which is later on validated through experts’ interviews. In addition, the study has also applied the proposed index using eight years data (2010-2017) from full-fledged Islamic banks of Pakistan to assess their maq¯as. id oriented performance. The findings reveal that only protection of intellect oriented performance of Islamic banks is improving whereas other maqasid oriented performances are deteriorating.