Disclosure of Governance Practice by Islamic Banks: An Application in Indonesia

Abstract

This study aims to evaluate the governance practices in Islamic banks in Indonesia by using the governance standards developed from AAOIFI and IFSB as the international sharia governance guidelines accepted throughout the world. Furthermore, this research will also identify what aspects have been and have not been fulfilled by Islamic banking in Indonesia in order to realize governance as expected. This research is a quantitative descriptive study that uses content analysis to explore and analyse the data. This study uses data sourced from annual reports, financial reports and websites of 12 Islamic banks in Indonesia, in 2016. Overall the data indicated that the index of governance of Islamic banks in Indonesia was still low when the guidelines sourced from AAOIFI and IFSB were used as benchmarks. The average score achieved by Islamic banks was 37%. Based on the guidelines prepared by Hasan (2011), the score was classified as emerging practices. The focus of Islamic banks to general governance was higher than specific governance information. Statistical tests demonstrated that this difference is significant. 

Keywords

• Corporate Governance,Islamic Financial Institutions,Sharia Governance

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