Developing and validating the components of Maqasid al-Shari'ah-based performance measurement model for Islamic banks

Purpose - The purpose of this paper is to develop and subsequently validate a Maqasid al-Shari'ah-based performance evaluation model for Islamic banks. Design/methodology/approach - Initially, a comprehensive review of the existing and relevant literature is carried out and a prototype evaluation model has been developed. This has been augmented and refined through in-depth interviews of Shari'ah scholars and banking experts. Afterwards, the modified model has been validated by taking inputs from academics and Islamic banking practitioners through a focus group discussion. Findings - The major outcome of the present work is a Maqasid al-Shari'ah-based performance evaluation model for Islamic banks. At the inception of the work, the Maqasid frameworks of Imam al-Ghazali and Abu Zahrah were combined. The combined model incorporates various dimensions, elements and the corresponding measures of three components, namely, justice, education and maslahah. Research limitations/implications - Not being able to test the model statistically or empirically can be considered as a limitation. Practical implications - The comprehensive theoretical framework of the developed model addresses all aspects of human well-being. Thus, if implemented the model will ensure welfare for all the stakeholders. It will also encourage the regulators to introduce new reporting standards which will be more reflective of Maqasid al-Shari'ah. Social implications - Fulfilling Maqasid will create a positive brand image for Islamic banks, which will attract more customers both Muslims and non-Muslims. Thus, this will create a wider scope for earning more revenues. Originality/value - There has been concern that Islamic banks are converging towards conventional banking systems and the same performance measure instrument is being used to evaluate the performance of both Islamic and conventional banks. The present work has developed a Maqasid al-Shari'ah-based performance evaluation model for Islamic banks.