Developing Holistic Performance Measurement Index for Islamic Banks

Abstract

For several years, performance of Islamic banks has gained the attentions of researchers from academic and industry. Considerable amount of the past literature has focused on the financial performance despite its limitations. This is because many current literatures are focused only on financial performance measurement. To date, there are no in-depth studies on holistic performance measurement which might be applicable to Islamic banks. Hence there exists a need to develop a holistic Islamic bank performance index and thereby to identify the relevant performance indicators. This study aims to formulate holistic performance measure that amalgamates the interests of both shareholders and stakeholders of Islamic banks. The Agency Theory, Stakeholder Theory and Maqasid Shari'ah are adopted as the basic frameworks to develop an integrated index for assessment of the overall performance of Islamic bank. The assessment framework is underpinned by performance mandates which are financial performance and principle of maslahah of Maqasid Shari'ah.