chapter  5
20 Pages

The Performance Measurement of Islamic Banking Based on the Maqasid Framework

ByMUSTAFA OMAR MOHAMMED AND FAUZIAH MOHAMMAD TAIB

It has been taken for granted that Islamic banking (IB) is only about avoiding interest, riba. The objectives of Islamic banking have not been formally addressed. As such, the present conventional performance yardsticks being used by IB have focused largely on financial measures. Hence there is a need to develop other performance measurements that would complement the financial objectives of IB. This chapter, therefore, proposes the objectives of IB from the theory of maqasid as-shari’ah and derives a model of IB performance measurement based on these objectives. A behavioral approach operationalization method (Sekaran, 2000) is used to quantify the maqasid into measurable IB performance indicators that are later used for testing on a sample of six Islamic banks. The banks are evaluated and ranked at three levels based on their: (1) performance ratios, (2) performance indicators and (3) the overall Maqasid Index.