Integrating Moral in a Dynamic Model of Corporate Social Responsibility in Islamic Economics and Finance

Abstract

This paper focuses on Corporate Social Responsibility (CSR) in Islamic Economics and finance. The escalating social and economic problems in particular during the current financial crisis have raised new questions as well as expectations about corporate governance, ethical and social responsibilities. Commentators have raised “ethical” as the missing link in financing and also in running financial institutions. Corporate Social Responsibility (CSR) has emerged and developed with the aim of constructing and directing the social responsibilities of economic and financial institutions. The main objective of this paper is to study the concept of CSR from an Islamic perspective with special reference to the moral values that are essential in Islam. Importantly, Islamic banks are criticized for not considering the social dimensions related to development, which is an essential distinguishing point of Islamic moral economy. This paper therefore attempts to respond by suggesting a new paradigm within CSR framework to help Islamic banking and financial institutions to overcome the gap between aspirations and realities. As a concrete policy implication, the paper suggests that Islamic banks should shift from the practice of giving charity and zakah in a traditional manner to a more systematic method of performing charity and zakah in order to ensure community development.