In recent years, the dynamic interplay between Islamic financial governance and corporate ethical conduct has captivated the attention of economists, financiers, and scholars alike. The study authored by Sallemi and Zouari, published in the International Review of Economics, delves deeply into the nuanced relationship between Shariah boards and the performance outcomes of takaful companies, revealing the pivotal intermediary role played by corporate social responsibility (CSR). This research heralds a new understanding of how Islamic financial institutions not only comply with religious injunctions but also leverage CSR initiatives to enhance operational success and stakeholder trust.
At the core of this investigation lies the Shariah board, an essential governing body within Islamic finance tasked with ensuring that commercial activities adhere strictly to Islamic law. The Shariah board’s function transcends mere compliance; it actively shapes strategic decisions, risk management frameworks, and product structuring in takaful firms—Islamic insurance entities grounded in mutual cooperation and shared risk. By rigorously supervising financial dealings, the board fosters an environment of ethical financial intermediation, thereby nurturing consumer confidence and sustaining institutional legitimacy.
Takaful itself represents a unique paradigm within the global insurance sector, distinguished by its cooperative model that diverges from conventional insurance models based on risk transfer for profit. The authors highlight how takaful’s foundational principles emphasize mutual indemnity and social solidarity, reflecting the broader Islamic values of justice and shared responsibility. However, translating these theological principles into practical business practices requires rigorous oversight—a role adeptly fulfilled by the Shariah board.
Extending beyond compliance, Sallemi and Zouari’s research probes the mediating influence of CSR—the voluntary integration of social and environmental concerns into business operations—on the relationship between Shariah governance and firm performance. The study empirically affirms that CSR initiatives serve as catalysts, amplifying the positive impact of Shariah boards on takaful performance. This suggests that ethical stewardship and social accountability embedded within Islamic finance are not only doctrinal imperatives but also strategic assets that drive competitive advantage and sustainable growth.
Corporate social responsibility, traditionally viewed through the lens of philanthropy or compliance, is reframed here as a strategic orchestrator within the Islamic finance ecosystem. The authors argue that CSR embodies the practical outworking of Shariah principles, translating abstract religious mandates into concrete actions that resonate with customers, regulators, and the wider community. The strategic infusion of CSR fosters trust, mitigates operational risks, and enhances reputational capital—factors crucial to the viability and growth of takaful firms operating in highly competitive and ethically nuanced markets.
The study’s methodology combines quantitative analyses with robust theoretical frameworks, offering rich insights into the causality linking Shariah oversight, CSR engagement, and corporate performance metrics. Data collected from multiple takaful firms reveal statistically significant correlations underscoring the dual importance of religious governance and social responsibility. The findings emphasize that beyond mere adherence to Shariah principles, active CSR engagement emerges as a vital mechanism enabling takaful companies to navigate both market complexities and the ethical expectations of Muslim consumers.
Moreover, the intricate governance model employed by takaful operators illustrates a sophisticated balancing act between religious norms and commercial objectives. Shariah boards operate as custodians of faith-compliant practice, while simultaneously endorsing CSR as a pathway toward commercial viability and ethical leadership. This dual role amplifies their influence, positioning them at the intersection of jurisprudential doctrine and modern business strategy, a position few regulatory bodies occupy so integrally.
From a technical perspective, the research further elucidates how CSR initiatives—ranging from environmental sustainability projects to community welfare programs—generate measurable improvements in financial performance indicators such as return on assets, customer retention, and operational efficiency within takaful firms. These outcomes are particularly salient given the growing consumer demand for transparency and ethical conduct, trends that increasingly define service quality in Islamic finance markets globally.
The implications of this research extend far beyond takaful to broader Islamic financial institutions and even conventional finance sectors exploring ethical finance frameworks. By empirically validating the strategic benefits of integrating religious governance with CSR, the study presents a compelling model for financial institutions seeking to reconcile profitability with societal impact. This integrated approach may well chart the future trajectory of sustainable finance worldwide.
Additionally, the research invites regulators and policymakers to reconsider frameworks governing Islamic finance, encouraging more holistic oversight that recognizes the symbiotic relationship between Shariah compliance and social responsibility. Such recognition could foster regulatory environments that incentivize CSR activities as intrinsic rather than ancillary to Shariah governance, thereby catalyzing a more resilient and ethically grounded financial sector.
Furthermore, the study calls attention to the evolving expectations of stakeholders—including customers, investors, and communities—who increasingly demand not only financial returns but also ethical consistency and social contribution. The ability of takaful operators to align with these expectations through effective Shariah and CSR integration places them at a strategic advantage, potentially influencing market dynamics and consumer loyalty in profound ways.
In terms of academic contribution, Sallemi and Zouari’s work bridges significant gaps in Islamic finance literature, particularly concerning the mechanisms through which governance structures influence corporate ethics and market performance. Their findings encourage further inquiry into the complexities of ethical finance, inviting interdisciplinary scholarship that combines finance, religious studies, and corporate governance.
Moreover, this research situates corporate social responsibility as an operational lever, rather than an ethical afterthought, within Islamic finance institutions. This repositioning opens pathways for innovation in CSR programming, encouraging firms to embed social responsibility deeply into their strategic planning, performance evaluations, and stakeholder engagement practices.
Considering the globalization of finance and the expanding footprint of Islamic financial products, the study’s insights are timely and globally relevant. As Islamic finance continues to grow in market share and sophistication, understanding the interplay between Shariah governance and CSR will be critical for practitioners aiming to enhance competitive positioning and fulfill both economic and ethical mandates.
In summary, the research illuminates a transformative linkage: Shariah boards, far from mere religious overseers, are active architects of corporate strategies that elevate takaful performance through embedded social responsibility. This integrated governance model not only ensures compliance with Islamic precepts but also cultivates trust, sustainability, and value creation, offering a blueprint for ethical finance in the 21st century.
As the financial world grapples with challenges of sustainability, ethical conduct, and stakeholder activism, the findings underscore the viability and vitality of Islamic finance principles harmonized with contemporary CSR practices. This synergy may well inspire new standards for governance and performance that transcend religious finance contexts, marking a paradigm shift with profound implications for the future of ethical capitalism.
Subject of Research: The impact of Shariah board governance on takaful company performance with a focus on the mediating role of corporate social responsibility.
Article Title: Shariah board and takaful performance: mediating role of corporate social responsibility.
Article References:
Sallemi, N., Zouari, G. Shariah board and takaful performance: mediating role of corporate social responsibility. Int Rev Econ 71, 175–204 (2024). https://doi.org/10.1007/s12232-023-00439-2
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