Ethical legitimacy of Islamic banks and Shariah governance: Evidence from Bangladesh

What is it about?

The research paper's fundamental objective is to examine the ethical legitimacy of the Islamic banks through the two crucial internal mechanisms of Shariah Governance (SG), that is, Shariah Supervisory Board (SSB) and Shariah officers. A semi‐structured questionnaire has been applied to collect data for attaining the research objectives. However, 17 respondents have been interviewed who have practical experiences concerning Islamic banks and SG. The study explores inappropriate SG practices, reporting, disclosure, and fatwas resolutions, which generate confusion among the customers and damage Islamic banks' institutional image. Islamic banks do not follow the proper SG guidelines and Shariah principles. These findings denote a negative legitimization of Islamic banks and SG practices.

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Why is it important?

The study considerably contributes to the enhancements of the responsibilities of the national and global regulatory bodies by providing internal Shariah authorities authorization from their ethical perspective. This research has numerous unique practical implications for the Islamic banks and the central bank of Bangladesh, which will help them to apply Shariah principles, improve the SG practices, and enhance Shariah compliance quality. This research extends the literature concerning SG and the legitimacy, legitimacy theory, and institutional theory of the Islamic banks concerning Bangladesh. This is the first research that explores the ethical legitimacy of Islamic banks.