Abstract
This thesis provides an attempt to explore the notions of fairness and trust building with employees and customers in Islamic banking. The study was designed: (1) to examine the associations between fairness and trust building and branch performance; (2) to understand the role of branch-level control systems in the relationships between fairness-and-trust and organisational performance; and (3) to understand the rituals and symbols of two Islamic banks with regard to building fairness and trust. This research undertakes a survey and qualitative interviews to examine the questions.
The study highlights a number of findings. Employee trust, customer fairness and customer trust have a main effect on organisational performance. This means building employee trust as well as customer fairness and trust is important in improving performance. The absence of a main effect of employee fairness is to some degree curious, but the interaction of employee fairness with control systems indicates that aligning this element of fairness with the appropriate control is significant.
To test the robustness of this finding, residual analysis was undertaken. In residual analysis, a regression line is drawn where employee trust, employee fairness, customer trust and customer fairness are the dependent variables and in turn control systems the independent. The further a branch score is from this line or benchmark model, the greater the residual. This residual is then regressed against performance as the dependent variable in a separate regression. This thesis finds that the deviations from the benchmark model alignment have significant negative association with performance. This implies that the greater deviation from the alignment between EFT building and control system use has a detrimental performance implication. Similarly, for customer fairness and customer trust, the results indicate that the positive deviations from the benchmark alignment between CFT building and the intensity of use of control systems have significant positive association with performance. This thesis concludes that aligning the relationships of both customer and employee (along the dimensions of trust and fairness) with control systems has important implications on performance.
This study then interviewed branch managers, shariah members and senior executives of the two Islamic banks. Thirteen interviews in one bank and three interviews in the other bank were coupled with archival documents of organizational policies. This study used Simons’ control levers framework to explore how belief systems and boundary systems could operate in Islamic banking. In particular, it has contributed to the framework by examining religious values and principles as sources of both beliefs and boundary systems. Also, by highlighting some of the practices in Islamic banks, such as aqad and doa’, the study helps our understanding on the role of rituals and symbols in bonding customers and employees to a bank.
In particular, religious values and principles, and the history of the organization have some influence on building and bridging to customers and employees. Morning meetings were an important control mechanism used by branches in both banks. However, branch managers vary in ways of conducting the meeting across branches and within banks in terms of what agenda to be given priority and how to conduct the morning meeting. While both banks place emphasis on rituals and symbols albeit with some differences in practice and extent, they were relatively lacking in anticipating customer hardship.
There were differences in the way each bank positioned itself in the market as well as the emphasis on each financial product. Further, both banks portrayed a different “flavour” of symbols and rituals related to religious-bound activities. This can be interpreted as part of effort to differentiate themselves from the competitors. The symbols and rituals were used to provide credibility to the constituents by giving impression that Islamic banks have been practising the espoused values of Islam. Shariah Committee and the related Shariah unit/department in the bank’s structure was established to ensure each bank was following certain Islamic principles based on the shariah. Through zakat (alms giving) and other religious programmes, Islamic banks had benefited by portraying the image of Islamic organisations. These symbols in a way help Islamic banks to enhance their social face in attaining the social objective in line with societal expectations.
The study was confined to the data of only two Islamic banks due to the access given. All 13 Islamic banks in Malaysia were contacted but only two accepted. The ability to generalize the results of the study is limited by the analysis of only the two Islamic banks. However, on a positive note, the limited scope allows a richer study of both banks. Thus, it provides a detailed study on control systems of Islamic bank. Both Islamic banks in this study were among the earlier batch of Islamic banks in Malaysia. Apparently, there exists an opportunity for conducting future study which includes the new breed of Islamic banks which were established as subsidiaries of conventional banks. The differences in history and organisational culture of the two groups may provide an interesting comparative study.