Roszaini Haniffa and
Bank, whether directly or through Shari’ah Internal Audit. We planned with Shari’ah Internal Audit Department to carry out monitoring functions through the acquisition of all information and clarifications that are deemed necessary to confirm that the Bank did not violate the principles and provisions of Islamic Shari’ah (BIB Annual Report 2004, p. 1, Section 2.)
On the other hand, the SSB reports of ADIB, ABB and SIB clearly state that the reviews were based on samples. In terms of identifying whether there had been any defects in the transactions that they examined, the SSB of two IBs consistently reported no defects in the product, as in the following statement:
... we certify confidently that all activities were practiced in compliance with Islamic Shari’ah and no violations have occurred, to the best of our knowledge (KFH Annual Re- port 2002, p. 9).
The SSB reports of ADIB and ABB indicated defects and explained how they were rectified, as in the following statements:
... management has been instructed to readdress defects found in some of such transactions and rectify their consequences (ADIB Annual Report 2002, p. 10).
Some transactions made by the Bank Branches in Pakistan where funds deposited with Islamic & Non-Islamic banks for investment in accordance with Shari’ah principles. We have noted partial irregularities in the operations of some of the said transactions where Shari’ah rules were not properly applied, accordingly part of the revenues were segregated (ABB Annual Report 2003, p. 5).
The SSB report of ADIB further indicated that management has been directed to assign the profit earned through resources not in line with Islamic ethical principles to a charity account:
Any profit earned through sources or methods that were not in line with sharia’a principles have been assigned to the charity account (Sadaqat) to be spent for charitable purposes as per our direction... (ADIB Annual Report 2002, p. 10).
Surprisingly, despite the reporting of no defects in the transactions, there were conflicting statements in
the ABB’s SSB report in 2002, as evidenced by the following: In our opinion the contracts, transactions and dealings entered into by the Bank...that we have reviewed are in compliance with the Islamic Shari’a Rules and Principles...
...all earnings that have been realized from sources or by means prohibited by Islamic Shari’a Rules and Principles have been disposed of to charitable causes (ABB Annual Report 2002, p. 15).
The first statement emphasised compliance with Is- lamic teachings while the second statement suggests that some aspects of earnings were from illegitimate resources and that management had been advised to dispose them to charitable causes. Interestingly, in the following 2 years, the SSB reports of ABB clearly state the existence of defects and their rec- ommendations to management, as in the following:
We advised the Management to postpone dealings with parties not in compliance with Shari’a principles such cases like pre- determining profit rates and lack of proper documents. We have presented Islamic alternatives for similar cases and standard forms will be presented for approval by the Shari’a Board (ABB Annual Report 2003, p. 5).
Only the SSB reports of DIB and ADIB consistently indicated that distribution of profits and losses were in line with Islamic teachings.
Summary and concluding remarks
Overview of findings and implications
Islamic Banks (IBs) exist to fulfil the financial (eco- nomic) needs of Muslims within the dictates of their religious faith. We extended the work of Gray and Balmer (2001) by attempting to measure the ethical identity of corporations that succeeded to form a niche market for themselves based on their ethical business philosophy. Since the foundation of the IBs’ business philosophy is the Shari’ah, we are more interested in exploring their communicated ethical identity as opposed to ideal ethical identity. Specifi- cally, we attempt to assess the strength or degree of ethical identity based on the variation between