Understanding the objectives of Islamic banking: a survey of stakeholders' perspectives

Purpose – The purpose of this paper is to survey the viewpoints of various stakeholder groups on the philosophy and objectives of Islamic banking, particularly in a dual banking environment, as in the case of Malaysia. Design/methodology/approach – The paper presents primary data collected by self‐administered and postal questionnaires involving a sample of 1,500 respondents representing seven stakeholder groups, namely customers, depositors, local communities, Islamic banking managers, employees, banking regulatory officers and Shariah advisers. An exploratory factor analysis is employed to examine the respondents' perceptions towards various objectives of Islamic banking. Findings – This paper reveals that respondents regard Islamic banking as an institution that should uphold social objectives and promote Islamic values towards their staffs, clients and the general public. Other factors perceived to be important include contributing to the social welfare of the community, promoting sustainable development projects and alleviating poverty. Practical implications – The empirical evidence of this paper affects two aspects; first Islamic banks must not be solely profit‐driven entities; rather they must aim at promoting Islamic norms and values to achieve the economic objectives as prescribed by Shariah (Islamic Law). Second, true success for Islamic banking participants depends on the extent to which they can integrate social goals with the mechanics of financial innovation. This research will be of interest to both incumbent and potential entrants into this niche market. Originality/value – The paper reports findings from the first nation‐wide survey of diverse stakeholder groups in the area of Islamic banking and finance.