ICIFEB

International Conference on Islamic Finance, Economics and Business

Volume 2018

Conference Paper

Islamic Corporate Governance and

Islamic Social Responsibility Towards
Maqashid Shariah
Atiqah and Yusro Rahma
FEB UIN, Syarif Hidayatullah, Jakarta

Abstract
This research aims to examine the implementation of Islamic corporate governance
(ICG) and Islamic social responsibility (ISR) and their implication towards maqashid
shariah. ICG proxied by IG-Score (Shariah Board, number of SB, doctoral qualification
of SB and management risk) adopted by Sudaryati and Eskadewi (2012). ISR proxied
by ISR Index that was adopted by Othman (2009) include: investment and finance,
product and service, labour, social, environment, and organization. Maqashid Shariah
proxied by Maqashid Shariah Index (MSI). This research used 10 samples of islamic
Received: 25 February 2018
bank listed on Indonesia Financial Services Authority (OJK) in period 2011 to 2014.
Accepted: 26 May 2018
Published: 26 June 2018 Multiple regression has been used to examine the hypothetical research. Results of
this research provide evidence that ICG negatively and significantly has no influence
Publishing services provided by
Knowledge E towards maqashid shariah, and ISR positively and significantly has an influence
towards maqashid shariah. Simultaneously, this research provides evidence that the
Atiqah and Yusro Rahma. This
article is distributed under the implementation of ICG and ISR on maqashid shariah.
terms of the Creative Commons
Attribution License, which
Keywords: Islamic corporate governance, Islamic social responsibility and maqashid
permits unrestricted use and
redistribution provided that the shariah
original author and source are
credited.

Selection and Peer-review 1. Introduction

under the responsibility of the
ICIFEB Conference Committee. 1.1. Background of research

The reasons underlying the implementation of Islamic corporate governance (ICG) and
its implications on the performance of Islamic banks need to be made in line with the
occurrence of a bankruptcy ‘Ihlas Finance house’, a financial institution of Islamic World,
in Turkey in 2001, which by economists and Islamic finance is alleged to be as a result
of weaknesses of internal and external mechanisms of firm governance [14]. Issues
regarding corporate governance weaknesses in the sharia banking industry increas-
ingly attracted the attention of economists and Islamic finance to find a solution. Volker

How to cite this article: Atiqah and Yusro Rahma, (2018), “Islamic Corporate Governance and Islamic Social Responsibility Towards Maqashid
Shariah” in International Conference on Islamic Finance, Economics and Business, KnE Social Sciences, pages 70–87. DOI 10.18502/kss.v3i8.2501
Page 70
 ICIFEB

(2003) and Asrori (2014) revealed two important weaknesses of corporate governance
of Islamic banking. First, regarding sharia compliance, namely, the management of
Islamic banks are not able to guarantee compliance with sharia on each product and
banking services that are provided, both related to investment depositors protection,
and management of Islamic banks are not able to guarantee the protection of financial
risks to stakeholders, investors, depositors.
Researchers Grais and Pellegreni (2006), with respondents a number of Islamic
banks in 16 countries including one in Indonesia, revealed the weakness of the internal
mechanism of corporate governance of Islamic banking, especially those involving
competence DPS and compliance adherence of sharia in operation and business, while
the weakness of external mechanisms associated with ICG implementation of Sharia
bank regulation is that it cannot be enforced effectively and implemented according
to Islam.
Islamic Implementation of Corporate Governance (ICG) cannot be released by the
Islamic Social Responsibility (ISR) because the two are of relevance. The principle of
ICG itself based on the concept of corporate governance according to the NCG consists
of Prices (Transparent, Accountability, Responsibility, independency and fairness) and
in accordance with the principles of Islamic values is based on Al-Quran and As-Sunna.
This means that one of the five principles of ICG, namely, responsibility, states that
significant emphasis should be given to the stakeholder companies who must comply
with the guidance of Islam, namely, the Qur’an and As-Sunna, while four other prin-
ciples (namely, transparency, accountability, independence and fairness) give more
emphasis to the shareholder in accordance with Islamic guidance.
Based on research conducted by the International Institute of Islamic Thought in
1996 indicated that Islamic banks do not fully carry out its social role in accordance with
the demands of Islam. A total of 32 Islamic banks in the world are to prioritize economic
goals compared with social goals with an indication that the economic criteria takes
precedence over social criteria when evaluating investment opportunities [24]. Farook
and Lanis (2005) argue that the economically more intensive form of Islamic banking
structures rather than religious norms should be footing.
With the increase of the implementation of CSR in the context of Islam, the desire
to make the reporting of social life, especially Islamic social reporting in companies
or institutions based on sharia also increases. With the need for disclosure of social
responsibility in the bank or institution of sharia, it is now referred as the Islamic Social
Reporting (ISR). Social responsibility reporting is developed by using Islamic Sharia
Social Reporting Index. Index ISR is a measure of the implementation of the social

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performance of Islamic banking that contains a compilation of items of standard CSR set
by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI),
which was then further developed by the researchers regarding the items of CSR that
should be disclosed by an Islamic entity [27].
Islamic Social Reporting (ISR) Index was first proposed by Haniffa (2002) and later
developed more extensively by Othman et al. (2009) in Malaysia. Haniffa (2002)
revealed the limitations of conventional social reporting and put forward that the
conceptual framework of Islamic Social Reporting under the provisions of sharia will
not only help make decisions for the Muslims but also assist companies in fulfilling the
obligations towards Allah SWT.
As a business entity, Islamic banks are not only required as an enterprise for sheer
profit (high profitability), but they also have to run the function and purpose as an
entity that is based on the concept of maqasid sharia (good shariah objectives). As
intermediary institutions between the surplus funds and the shortage of funds, the
role of Islamic banking is in channelling funds collected to the community, especially
the real sector. The relationships of Islamic banks with their customers is more of a
relationship between owners of capital and labour (managers) than of a debtor and
creditor that exists in the conventional banking system [29].
Implementation of maqasid syariah by Islamic banking has become a concern
according to some sharia economic researchers although the numbers are still limited.
O.M. Mustafa (2008) through his research has made performance measurement
of Islamic banking in the form Maqasid Shariah Index (SMI). Dusuki (2007) in his
study explains that maqasid sharia and maslahah become an important component in
implementing Corporate Social Responsibility (CSR) Islamic banking. Kuppusamy (2010)
through his research tried to measure the performance of Islamic banking through the
aspects of sharia (sharia-conformity) and the profitability of Islamic banks.
Based on these descriptions, the researchers analysed ICG and social responsibility
towards maqashid sharia.

1.2. Problems of research

Based on the background, the formulation of research problems are as follows:

i. How does ICG affect maqashid sharia?

ii. How does ISR affect maqashid sharia?

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1.3. Objective of research

Based on the formulation of the aforementioned problem, the purpose of this research
is:

1. to analyse the effect of ICG towards maqashid sharia and

2. to analyse the effect of ISR towards maqashid sharia.

1.4. Benefits of research

1. As consideration for Islamic banking to further give full attention to governance

in accordance with sharia (ICG).

2. As consideration for the Shariah Supervisory Board (DPS), management practi-

tioners and business owners regarding the factors that need to be considered
in carrying out corporate social responsibility (CSR) in accordance with Islamic
principles.

3. Provides an alternative measurement to measure the performance of Islamic

banking in not just a mere profit-oriented way but also against the implementa-
tion of Sharia maqashid. Moreover, it can be a matter of evaluation for the Islamic
banking industry to identify the weaknesses and improve their performance.

2. Study Theory and Testing Hypotheses

2.1. Agency theory

According to Jensen and Meckling (1976), there are two forms of agency relationships,
that is, between managers and shareholders (shareholders) and between managers
and lenders (bondholders). Agency problem arises because of differences of interest
between the principal and agent in an organization. Problems arising from the differ-
ences of interest between principal and agent called with agency problems with one of
the causes being the existence of information asymmetry. Asymmetry of information
is an imbalance between the information held by the owners and the management.
The owners do not have enough information about the performance of management,
while management has more information about the capacity of self, work environ-
ment, and the company as a whole.

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2.2. Shari’a enterprise theory (SET)

This theory is used to understand the importance of CSR for stakeholders in the per-
spective of Islam. It states that stakeholders are not only man and nature, but also god.
According to this theory, stakeholders include god, human beings (who are divided
into direct and indirect stakeholder) and nature. Judging from the discussion pertaining
to the stakeholder theory, it can be said SET complements conventional stakeholder
theory. On the other hand, this theory also complement enterprise theory (ET), which
explains that the accounting should serve not only the owner of the company, but also
the community [16].
SET was developed by Triyuwono (2006) by improving the definition of the enter-
prise theory (ET) from the viewpoint of sharia. According to Triyuwono (2007), ET is
more similar to the values of capitalism, while accounting sharia refers to ET. There-
fore, in order to bring sharia accounting closer to his all-sharia, ET theory was further
developed based on Islamic principles to be more relevant for accounting sharia.

Figure 1: Stakeholder according to Shari’a Enterprise Theory (SET).

From Figure 1, it is implicit that SET does not put the human position as the centre
of everything. Instead, SET puts god at the centre of everything. God be the centre
point of the return of the creatures in the entire universe. Meanwhile, humans are just
his representative (Deputy) while on earth to take care of all the natural resources as
the provision of live and worship in the earth. As his words: “... Behold, I am about
to make a vicegerent on earth...” (Al Baqarah, 2:30) and “and I do not create the jinn
and mankind except to worship Me” (Adh Dzariyaat, 51:56). Then all the company’s
activities should be submissive and obedient to all the laws of god.
When associated with ICG and ISR, as has been stated earlier, one of the principles
of ICG is that the responsibility is a form of social accountability, then SET considers
that all the activities of the social enterprise is a form of compliance with company
owners to the conviction to contribute to the good of all those in need.

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2.3. Islamic corporate governance (ICG)

The ideal Islamic corporate governance is the one accordance with the principles of
Islamic economics, developed using the stakeholder theory that accommodates the
interests of all stakeholders of the company in a fair fashion (Iqbal and Mirakhor, 2004);
it is based on sharia rules in accordance with the Islami right of ownership and con-
tractual agreements (Lewis, 2005). Referring the aforementioned recommendation,
further, Hasan (2008) developed a model of Islamic stakeholder corporate governance.
He explained that the main organs of ICG is a shariah board (Sharia Council, which
is responsible as an advisory board and supervisory sharia compliance), obliged to
ensure compliance with the company’s management to Islamic principles. The focus
of attention of corporate governance is to meet compliance with the Islamic Sharia
principles that bind all stakeholder parties in fulfilling obligations and acquiring rights
to the company.
DPS is an independent body that was placed by the National Sharia Council (DSN) on
Bank Syariah Business Unit Sharia and other Islamic financial institutions. DPS members
shall consist of experts in the field of sharia muamalah, and who also have general
knowledge in the field of banking. The requirements set by the DPS member DSN
(Arifin, 2003: 115). In Indonesia, the DSN itself is a part of the Indonesian Ulema Council
(MUI), which serves to develop the application of the values of sharia in economic
activity in general and the financial sector in particular, including the business of bank-
ing, insurance and mutual funds. The authority of the DSN itself is issuing a fatwa on
the types of activities, products and Islamic financial services as well as overseeing the
implementation of the fatwa by the Islamic financial institutions in Indonesia through
DPS (Arifin, 2003: 116).

2.4. Islamic social responsibility (ISR)

ICSR-related theory study can be referred first to the study made by Haniffa (2002).
His research resulted in a framework of CSR called Islamic Social Reporting Disclosure
(ISR). The framework was developed based on the principle of monotheism, sharia law
and ethics. Subsequent research was conducted by Othman et al. (2009) to develop
a framework for the ISR that was created by Haniffa (2002) previously. As a result,
Othman et al. (2009) add governance themes in the previous frame, so that the ISR
framework that he developed consists of six themes, namely: finance and investment
themes, products and services, employees, society, environment and governance.

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2.5. Maqashid Syariah

In language, Maqasid al-Sharia consists of two words, that is, maqasyid and shari’ah.
Maqasid is the plural of maqshud meaning purpose and sharia means the path to the
source. Simply put, maqashd al-Sharia means that the purpose of the law is prescribed
in Islam. Imam Ghozali, a highly respected scholar of Islam, gives the purpose of sharia
as follows [9, 11]: The main purpose of Sharia is to promote human welfare, which
lies in the protection of the faith (din), soul (nafs), intellect (aql), descent (nasl) and
property (maal).
Implementation of maqasid syariah by Islamic banking has become a concern
to some economic sharia researchers, although the numbers are still limited. O.M.
Mustafa, (2008) through his research has made performance measurement maqasid of
Islamic banking in the form of Maqasid Shariah Index (SMI). Maqasid sharia measured
in this study is based on the concept of maqasid syariah described by Muhammad Abu
Zahrah (1958) in his book Usul Fiqh, explaining the concept of maqasid syariah more
broadly and generally, that there are three objectives of the existence of Islamic law,
namely: Tahzib al-Fardi (educating human), Iqamah Al adl (upholding justice) and Jalb
Maslahah (public interest) as measured by several parameters based on the three
aspects.
Reasearchers Omar and Dzuljastri (2009) related maqasid syariah index (MSI)
showed that sharia maqashid approach can become a strategic alternative approach
to describe how good the performance of the national banking system are and so that
it can be implemented in the form of a comprehensive policy strategy.

2.6. Relevant results

2.6.1. Implementation of ICG and maqashid sharia

Safiadine (2009) researched regarding good corporate governance on the performance

of Islamic banking company operating in desert regions of Saudi Arabia, Kuwait, Qatar,
Bahrain and the United Arab Emirates. The results suggest the practice of good corpo-
rate governance has a positive effect on increasing the performance of Islamic banking.
It suggests that Islamic banks to index its corporate governance in the high category,
significantly operate more efficiently and can therefore achieve sales growth rate and
the highest profit and vice versa.

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Darmadi (2011) researched with the title of corporate governance disclosure in the
annual report: An exploratory study on Indonesian Islamic banks. Darmadi’s measuring
mechanism of Corporate Governance Disclosure Index (CGDI) is the DPS, the board of
directors, board committees, internal control and external audit, and risk management.
Research results show that Bank Muamalat and Islamic Bank has been applying the
CGDI more compared to the other banks in Indonesia. His research also concluded that
the overall application of the CGDI is still quite weak.
Ade dan Jumansyah’s (2013) research results showed that GCG implementation of
Shariah Good Governance Business fluctuated from year to year. The achievement of
maqashid Muammalat Shariah by Bank Indonesia and Bank Syariah Mandiri in Indone-
sia in the period 2009–2011, in general, looks pretty good, although still very volatile.
On the third dimension, maqashid achievement of syariah sees that gains are generally
not stable. It also indicates that the achievement of GGBS practices by both the Islamic
Banks, which is relatively excellent in the period 2009–2011, which is above 75 percent,
is not a direct impact on the achievement of complete and stable shariah maqashid.
Asrori’s (2014) researched on the title of ‘Islamic Implementation of Corporate
Governance and Performance Implications Islamic Bank’. The results showed that
the implementation of ICG duties and responsibilities of the Sharia Supervisory Board
(DPS) has a positive effect on the performance of Islamic banks, measured by the ratio
of Islamic financial conformity financing for the results and zakat, but does not affect
the Islamic income ratio, return on investment, return on equity and profit margin.

2.6.2. Implementation of ISR and maqashid sharia

Haniffa (2002) researched on the title ‘Social Reporting Disclosure: An Islamic Perspec-
tive’; from the research, Haniffa built a theory and not just empirically examined the
influence of ISR disclosures. Islamic Social Reporting (ISR) consists of five themes:
(1) finance and investment, (2) products, (3) employees, (4) community and (5) the
environment. Othman (2009) researched on the title ‘Determinants of Islamic Social
Reporting Among Top Shariah-Approved Companies in the Bursa Malaysia’ using a
sample of top 100 companies, not banking; the research results show that the size,
profitability and the composition of the board affect the disclosure of the ICSR, while
the type of industry does not affect.
The research result of Dwi Fitria (2010) showed that the scores of Islamic banking
CSR disclosure GRI version are higher than the disclosure of ISR version, meaning

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that Islamic banking is not present disclosure should CSR Islamic identity that dis-
tinguishes from conventional banks. Khursid et al. (2014) conducted research with
the title of ‘Islamic Developing Model of Corporate Social Responsibility (ICSR)’; the
results of the research developed the theory of CSR. Carroll (1979). The result ICSR
dimensional model of Islamic economics, Islamic legal, ethical Islam and Islamic philan-
thropy. Arshad et al (2012) conducted research with the title ‘Islamic Corporate Social
Responsibility, Corporate Reputation and Performance with samples of Islamic banking
in Malaysia’; the research results show ICSR’s partial effect on reputation, ROA and ROE
of the company, in which the size of the company is used as a variable control.
Afrinaldi (2013) conducted a study that measures the performance of Islamic bank-
ing in Indonesia with maqashid approach syariah index (SMI) and profitability results
showed that the measurement of performance in Indonesia can be done with a model
of SMI. Omar and Dzuljastri’s research (2009) shows that Islamic banks should prioritize
performance measurement in accordance with the shariah that is maqashid sharia.
Dusuki (2007) has conducted research with the title ‘Maqasid al-Shariah, Maslahah
and Corporate Social Responsibility’; the research results show that the maqasid sharia
and concepts maslahah become an important component in implementing Islamic CSR
banking. Kuppusamy (2010) through his research tried to measure the performance of
Islamic banking through the aspects of sharia (sharia-conformity) and the profitability
of Islamic banks.

2.7. Hypothesis

Based on the foundation of the theory and the aforementioned conceptual framework,
the hypothesis of this study are as follows:

H1: ICG’s effect towards maqashid sharia

H2: ISR’s effect towards maqashid sharia

3. Method
3.1. Place and time research

This study aims to analyse the causal relationship used to explain the influence of
Islamic ICG and social responsibility with the approach of maqashid sharia. The com-
pany’s research population is Islamic banking in Indonesia in 2011–2014.

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3.2. Research method

This is a quantitative research using financial data of Islamic General Bank in Indonesia.
The population of this research is the Islamic General Bank in Indonesia from years 2011
to 2014. A sample of this research is determined by the method of purposive sampling
with the criteria as follows:

1. Islamic General Bank that is consistence in operating between 2011 and 2014

2. Islamic General Bank that publishes the annual report between 2011 and 2014

3. Presents data regarding the researcher’s needs

Multiple regression analysis tests the influence of the independent variable against
the dependent variables. This analysis is used to test the hypothesis with regression
equation as follows:

MSI = β0 + β1 ICG + β2 ISR + ε,

where:
MSI = Maqashid Syariah Index Omar dan Dzuljastri (2009)
ICG = Islamic Corporate Governance Sudaryati dan Yunita (2012)
ISR = Islamic Social Responsibility Othman et al. (2009)

3.3. Population and sample

The population in this study is the Islamic Banks listed on the FSA period from 2011
to 2014. The method of selecting samples in this study is a research method non-
probability samples, with purposive sampling approach, which means that the pop-
ulation sampled in this research was the population that met the criteria for certain
samples in accordance with the desired researchers. The criteria used to select the
sample as follows:

1. Islamic Banks listed on the FSA in the 2011–2014 period.

2. The company provides information on implementation of CSR in the annual report

2011–2014.

3. The company reported annual report 2011–2014, which can be accessed through
the website of Indonesia Stock Exchange (www.idx.co.id). That is, the information
contained in the annual report is accessible.

4. The company has a complete data relating to the variables studied.

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3.4. Data collection techniques

The data used in this research is secondary data drawn from the annual reports of
Islamic Banks listed on the FSA in 2011 until 2014. This secondary data is the data that
has been processed by the company and has been published in the form of financial
statements, or in other words, the data is not are directly taken from the company
concerned and is obtained from agencies (agencies) related, namely, Indonesia Stock
Exchange and are available by downloading on the site www.idx.co.id. Besides the
literature was conducted to search for and collect the information; such as books,
articles, journals and data from the Internet.

3.5. Data analysis techniques

Methods of data analysis in this research is to use statistical calculation, namely,

the application of SPSS. Once the required data was collected in this study, we then
performed the data analysis consisting of descriptive statistical methods, the classic
assumption test and the hypothesis testing.

4. Result and Discussion

This research population is the Islamic banking in Indonesia from 2011 to 2014 period.
The sample of Islamic General bank that was taken using the purposive sampling
method. Based on the method, obtained 10 Islamic General Bank in four years, so
that the total is 40.
From the 12 Islamic banks, 10 banks were taken as samples. Samples are entities
that regularly publishes annual report for the period 2011–2014, published and publicly
accessible. In this study, the company’s annual report is used as a material to be
analysed by researchers.

4.1. Coefficient determination

Coefficient determination test is done to measure the ability of independent variables,

are ICG and ISR explain dependent variable are Maqashid Syariah Index (MSI) than
Return on Assets (ROA). The result of coefficient determination test can be seen in
Table 2.

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Table 1: Bank Umum Syariah yang terdaftar di OJK (Sharia Commercial Banks registered with OJK).

No. Bank Name Tahun Berdiri Kode

(Year of (Code)
Establishment)

1 Bank Muamalat Indonesia 1992 BMI

2 Bank Syariah Mandiri 1999 BSM

3 Bank Mega Syariah 2004 BMS

4 Bank Rakyat Indonesia Syariah 2008 BRIS

5 Bank Bukopin Syariah 2008 BSB

6 Panin Bank Syariah 2009 PBS

7 Bank Central Asia Syariah 2010 BCAS

8 Bank Negara Indonesia Syariah 2010 BNIS

9 Bank Jabar Banten Syariah 2010 BJBS

10 Bank Victoria Syariah 2010 BVS

11 Maybank Syariah Indonesia 2010 MSI

12 Bank Tabungan Pensiun Negara 2014 BTPNS

Syariah

Source: Data sekunder yang diolah (secondary data processed)

Table 2: Coefficient determination result with MSI.

Model Summary𝑏

Model R R Square Adjusted R Std. Error of

Square the Estimate

1 0,496𝑎 0,246 0,205 0,0270568

a. Predictors: (Constant), ISR, ICG

b. Dependent variable: MSI

Based on the statistics result, it is obtained the value of Adjusted R Square is 0,205.
The coefficient shows that 20.5percent variation of maqashid syariah index (MSI) can
be explained by ICG than ISR. While 79.5 percent (100–20.5%) is explained by other
variables which have not been examined.

4.2. Hypothesis testing

Hypothesis testing in this research is done using multiple regression t-test and F-test
as follows:

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i. t-statistic test result

Table 3: Regression results of t-test with MSI.

Coefficients𝑎

Model Unstandardized Coefficients Standardized t Sig.

Coefficients

B Std. Error Beta

1 (Constant) 0,217 0,028 7,623 0,000

ICG –,039 0,036 –,179 –1,099 0,279

ISR 0,137 0,040 0,556 3,420 0,002

a. Dependent variable: MSI

Based on Table 3, the regression equation model is as follows:

MSI = 0.217 – 0.039 ICG + 0.137 ISR,

where:
MSI = Maqashid Syariah Index
ICG = Islamic Corporate Governance
ISR = Islamic Social Responsibility

4.2.1. Testing hypothesis 1: Influence of ICG towards MSI

The first hypothesis examined the influence ICG towards Maqashid Syariah Index (MSI).
Based on Table 2, ICG variable shows t-value—1,099 with significancy level probability
0,279. Significant level more than 0,05 means ICG negatively influence and is not
significant towards MSI and the hypothesis is thus rejected.
This research is inconsistent with Muttakin dan Ullah (2012), Asrori (2014), Mollah
dan Zaman (2015) dan Kholid dan Bachtiar (2015) who proved that the more higher
the ICG disclosure, the more higher the Maqashid Syariah Index (MSI). Financial per-
formance of Islamic bank based on maqasid syariah is a process to determine if Islamic
banks can achieve their goal of Islamic bank according maqashid shariah, dari maqashid
syariah. Financial performance have direct relationship with the goals, so performance
achievement indicators are based on the goals. Mohammed, Razak dan Taib (2008)
used maqasid syariah classification based on Abu Zaharah (1997), i.e., (1) Tahdhib
al-Fard (individual educative); (2) Iqamah Al-adl ( justice), dan; (3) Jaib al-Maslahah
(increase welfare).

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This research consistent with Jumansyah dan Ade’s (2013) proved that GCG with Good
Governance Business Shariah of implementation didn’t directly affect the complete and
stable Maqashid Shariah achievement. It means ICG which proxied by advisory shariah
board, number of advisory shariah board, qualification and skill of advisory shariah
board and management risk is not able to increase Islamic bank performance that is
measured by Maqashid Syariah Index (MSI).

4.2.2. Testing hypothesis 2: Influence of ISR towards MSI

The second hypothesis examined the influence of ISR towards Maqashid Syariah Index
(MSI). Based on Table 2, ISR variable shows t-value—3,420 with significancy level
probability 0,002. Significant level less than 0,05 means that ISR positively influences
and is significant towards MSI, and hence, hypothesis 2 is accepted.
This research consistent with Dusuki (2007) and Kuppusamy (2010) proved the ISR’s
influence towards Maqashid Syariah Index. Dusuki (2007) shows that maqasid syariah
and maslahah concepts are essential components of implementing Corporate Social
Responsbility (CSR) in Islamic banking. Kuppusamy (2010) tried to measure Islamic
banking performance with sharia conformity.
It means the higher the implementation of Islamic Corporate Social Responsibility
(ISR) with measured by score 1 and 0 according to few items which consist investment
and finance, service and product, labour, social, environment and corporate gover-
nance so the financial performance, the more higher based on Maqashid Syariah Index
(MSI) measurement. Maqashid Syariah Index (MSI) is a performance measurement
model of Islamic banking which is suitable with goal and characteristic of Islamic bank-
ing. MSI developed with three primary factors, for instance education, justice and
welfare achievement that is universal.

4.2.3. F-statistics test results

F-statistical test is used to determine the effect of all independent variables in the
regression model simultaneously or together with dependent variable being tested at
a significant level of 0.05. If the probability is less than 0.05 F, so Ha is accepted and H0
rejected, whereas if it is greater than 0.05, then Ho is accepted and Ha refused. Table
4 shows the results of F-statistical tests.
According to Table 4, significant test results were obtained; variable (X) can signif-
icantly affect the dependent variable test results or ANOVA F test can be calculated

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Table 4: Hasil Uji Statistik F dengan MSI (Statistical Test Results with MSI).

ANOVA𝑎

Model Sum of df Mean F Sig.

Squares Square

1 Regression 0,009 2 0,004 6,034 ,005𝑏

Residual 0,027 37 0,001

Total 0,036 39

a. Dependent variable: MSI

b. Predictors: (Constant), ISR, ICG

at 6,034 with probability 0.005. The probability is significantly smaller than the limit
value (α = 0,05), the regression model states that the independent variables ISR and
ICG jointly affect the MSI, and hence the variable ISR and ICG can be used together.

5. Conclusion

This study aims to determine the implementation of Islamic ICG and social responsibil-
ity of the financial performance review by maqashid sharia and Profitability. The test
results and the discussion in the previous sections can be summarized as follows:

1. ICG has no significant negative effect on the maqasid syariah index. The results
of this study are consistent with research of Ade dan Jumansyah (2013), which
showed that GCG implementation of Good Governance Business Shariah has
not been a direct impact on the achievement of complete and stable Shariah
maqashid.

2. ISR has a positive and significant impact on sharia maqashid index. The results of
this study are consistent with Dusuki (2007) and Kuppusamy (2010) that shows
that the ISR maqasid affect the Syariah Index. Results of Dusuki’s (2007) study
showed that the maqasid sharia and concepts of maslahah become an important
component in implementing CSR Islamic banking.

3. ICG which proxied by advisory shariah board, number of advisory shariah board,
qualification and skill of advisory shariah board and management risk is unable to
increase Islamic bank performance that is measured by Maqashid Syariah Index
(MSI).

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4. The higher of Islamic Corporate Social Responsibility (ISR) with measured by

score 1 and 0 according few items which consist investment and finance, service
and product, labour, social, environment and corporate governance can increase
Maqashid Syariah Index (MSI) measurement. Maqashid Syariah Index (MSI) is
performance measurement model of Islamic banking which is suitable with goal
and characteristic of Islamic banking. MSI developed with three primary factors,
for instance, education, justice and welfare achievement which is universal.

5. The result of research provides an alternative measurement to measure the per-

formance of Islamic banking is not just a mere profit-oriented but also against the
implementation of maqashid sharia.

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