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Selamat Datang!
Welcome to the 16 th Annual Conference of the Asian Academic Accounting

Association

(4A).

We are delighted to be holding a 4A conference in Indonesia for the third time. Indonesia joins
Malaysia as the only countries with the distinction of hosting the conference three times.
The 4A was launched

in 1998 to serve as the professional

organization

for accounting

academics in Asia and beyond. It brings together colleagues from many countries to share their
research as well as to discuss pedagogical
to facilitate collaborations
an organization

and other issues of mutual interest. Our mission is

and programs to enhance accounting education and research. We are

of our members and for our members. I urge you to participate

in the current

activities of the 4A as well as to suggest additional programs and activities that are of interest
to you.
On behalf of the 4A Executive Committee and all 4A members, I thank our colleagues at the
University

of Indonesia for hosting this year's conference.

I particularly

thank Dr. Ancella A.

Hermawan

and her dedicated team of Organizing Committee members for their planning and

dedication

in putting together a superb conference.

I also take this opportunity

to thank our

sponsors, our keynote speakers and our honored guests.
I hope that you will take advantage of the wonderful program that they have arranged and take
the opportunity to renew acquaintances
professional
conference

with old friends, to make new friends, and to grow your

networks during the conference. I wish all participants

a productive and enjoyable

and visit to Indonesia.

Shahrokh M. Saudagaran
Secretary General, Asian Academic Accounting Association baZYXWVUTSRQPONMLKJIHGFEDCBA

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All praise and glory be to God for all His blessings upon us. We would like to thank the Asian
Academic

Accounting Association for letting us organize the event.

The 16th Asian Academic

Accounting

Association

(AAAA) Annual Conference

is held in

Bandung, West Java, Indonesia hosted by Universitas Indonesia. This year Annual Conference
addresses the latest issues in accounting covering wide research areas such as Corporate
Responsibility
Accounting,
Education,

and Corporate Governance, Financial Accounting and Reporting,
Auditing and Internal Controls, Management

Corporate

Finance and Capital Markets,

Public Sector Accounting, Forensic Accounting,

Accounting,

International

Taxation,

Social and Environmental

Islamic Accounting,

Social

Accounting

Accounting
Accounting,
Information

Systems, and Case Studies and Issues in Accounting. The conference brings together a diverse
group of accounting and finance educators and professionals

from throughout

Asia and the rest

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The Committee
conference.

received

136 paper submissions

and 88 papers will be presented

during the

We hope that this conference will bring positive and shared discussions

to enhance

the optimal outcome towards your research publications.
We hope that all of the participants could enrich their knowledge
atmosphere

as well as enjoy the beauty

of Bandung during the conference.

Dr. Ancella A. Hermawan
Steering Committee

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16

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ANNuAL

CONFERENCE

A S IA N A C A D E M IC
A C C O U N T IN G

A S S O C IA T IO N

O R G A N IZ IN G
S T E E R IN G

C O M M IT T E E

Dr. Ancella A. Hermawan, CA

C O M M IT T E E

Prof. Siddharta Utama, Ph.D., CFA
Prof. Akhmad Syakhroza, Ph.D., CA
Prof. Dr. Lindawati Gani, CA NMLKJIHGFEDCBA

C H A IR

Dr. Dyah Setyaningrum

VICE CHAIR

Selvy Monalisa, MBA, CA

C O M M IT T E E

M E M B E R S baZYXWVUTSRQPONMLKJIHGFEDCBA
Elvia R. Shauki, PhD

Christine, M.Int.Tax, CA
Desti Fitriani, MA, CA
Rahfiani Khairurizka, MAce, CA
Agustin Setyaningrum, M.S.Ak., CPMA
Rallyati, MAk, CA
Edward Tanujaya, MBA, CA
Elfina A. Sambuaga, M.S.Ak.
Nur Aulia Rahmah, MSc
Luluk Widyawati, MBus
Nurul Husnah, M.S.Ak., CA
Teguh Iman Maulana, M.S.Ak., MSc
Panggah Tri Wicaksono, MSc
Dian Nastiti, MCom, CA
Rafika Yuniasih, M.S.M., CA
Dahlia Sari, M.Si., CA
Desi Adhariani, PhD, CA

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Prof. Dr. Normah Omar,ZYXWVUTSRQPONMLKJIHGFEDCBA
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Moderator:
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The Impact of Ethics

Education

on Earnings

Management

Judgment:

A Quasi-Experimental

Approach
M a h fu d

S h o lih in ,

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U n iv e r s ity

M ada

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of Employers,

Junior

Auditors,

Lecturers

and

Students
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D ia n

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U n iv e r s ita s

U n iv e r s ita s

H erm aw an,

Accounting

Students'

In d o n e s ia

In d o n e s ia

U n iv e r s ita s

Perception

In d o n e s ia

of the Benefits of Student Centered

Learning

Methods

to Soft

Skills Development
Rahm i

S e p tia n i

D yah

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P u tr i,

U n iv e r s ita s

S e ty a n in g r u m ,

Legitimizing
E lv ia

In d o n e s ia

U n iv e r s ita s

In d o n e s ia

Higher Degree Actions in Enhancing

S h a u k i,

U n iv e r s ita s

Sharon

Y a m , U n iv e r s ity

A n c e lla

H erm aw an,

Graduate Employability

In d o n e s ia /U n iv e r s ity

o f S o u th A u s tr a lia

o f S o u th A u s tr a lia

U n iv e r s ita s

In d o n e s ia

I-D Auditing Issues
Moderator:
•

Dr. Ancella A. Hermawan,

The Determinants
Agung
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Saphire 2 Room

N ur P robohudono,
N anda

Government

B a r lia n ,

Determinants

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S e b e la s

S e b e la s

W id a g d o ,

D in i M e iy a n ti,

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M aret

S e b e la s

S e b e la s
M aret

U n iv e r s ity

U n iv e r s ity

M aret

Evidence from Indonesia

U n iv e r s ity

U n iv e r s ity

of Settlement Audit Recommendation

H a r ta n to ,

S e b e la s

M aret

N ur P robohudono,

Review of Money Laundering
Z u r a id a h

M ohd

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N oor

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Auditors Ethical Decision-Making:

A ri K uncara

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of the Auditor Comments ofthe Audit Board ofIndonesia

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M o d e r a to r :

•

Issu es

Environmental
R o m la h

Z a k i,

M a h fu d

•

Impression

Management

Theory

M a la y s ia

K ebangsaan

G a d ja h M a d a

M a la y s ia

U n iv e r s iti

K ebangsaan

M a la y s ia

G a d ja h M a d a

A c c o u n tin g

U n iv e r s ity

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I s m a il, In te r n a tio n a l

A n c e lla

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K a r tik o ,

Infrastructure,

U n iv e r s ity

2 R oom

M a la y s ia

External Audit, and Legislative

Oversight

Structure on

in Indonesia

In d o n e s ia

U n iv e r s ita s

In d o n e s ia

of Local Government:

A Study

on Local

Government

Characteristics,

and Financial Condition

W in a r n a ,

A ri K uncoro

Correlation

U n iv e r s ita s

A . H erm aw an,

Distress

Jaka

Is la m ic

of Local Government Budget Implementation

W ahyu

in Facebook

U n iv e r s ity

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S ig it

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U n iv e r s iti

C he Abdul Rahm an,

D r . S u h a iz a

Performance

•

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S h o lih in ,

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M o d e r a to r :

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Ahm ad

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B u n d a M u lia

A d in e h z a d e h ,
R id h u a n

Evaluating

U n iv e r s ity

Performance and Disclosure:

J a ffa r ,

R a z ie h

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K la b a t

Sam buaga,

M ara

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among Aspects of Triple Bottom Line: Empirical Study i n Indonesia

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Ik a P r a y a n th i,

•

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U n iv e r s ity

A n is , T r is a k ti

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U n iv e r s ita s

W id a g d o ,

S e b e la s

U n iv e r s ita s

between Performance

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and Development

Output: Relationship

Analysis of

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U n iv e r s ita s

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2-E Disclosure Issues
Dr. Aidi Ahmi,ZYXWVUTSRQPONMLKJIHGFEDCBA
U n iv e r s iti U ta r a M a la y s ia

Moderator:
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Mirah Room

The Analysis

of Impact of Financial

Level of Environmental
D in y

S u lis ty o w a ti,

R a tn a

•

U n iv e r s ita s

W a r d h a n i,

Disclosure

Performance

Performance

U n iv e r s ita s

to Carbon Emission

and Governance

as Moderating

Disclosure

with Country

Variable

In d o n e s ia
In d o n e s ia

and Implementation

of Corporate

Social Responsibility

Practices:

Case of an Islamic

Bank
N e y s h ia

A m a lin a ,

U n iv e r s ita s

G a d ja h

M ada

M a h fu d

S h o lih in ,

U n iv e r s ita s

G a d ja h

M ada

A h m a d JIHGFEDCBA
Z a k i, U n i v e r s i t a s

•

G a d ja h M a d a

The Role of Intellectual Capital Disclosure in Relation between Underwriter

Reputation and Under-

pricing: Empirical Evidences from Indonesia
W ahyu

W id a r jo ,

R a h m a w a ti,
Bandi

Tunas P em bangunan

S e b e la s

S a r d jo n o ,

A ri K uncara

M aret

S e b e la s

W id a g d o ,

U n iv e r s ity

U n iv e r s ity

M aret

U n iv e r s ity

S e b e la s

M aret

U n iv e r s ity

19.00 - 22.00

Gala Dinner and Cultural Performances

08.00 - 08.30

Registration

08.30 - 10.00

Concurrent Session 3

3-A Earnings Management Issues
Moderator:
•

Dr. Budi Frensidy,

The Effect

of Bali Bombing

Management

Practices

Companies

In d o n e s ia

I, Bali Bombing

in Transportation

II, And Mega Kuninga~

Sector

and Hotel,

Bombing

Restaurant,

and

on Earnings

Tourism

Sector

in Indonesia

Jauza

A z a r ia ,

U n iv e r s ita s

D e s i A d h a r ia n i,

•

Berlian 1 Room

U n iv e r s ita s

In d o n e s ia

U n iv e r s ita s

In d o n e s ia

Earnings Breaks and Earnings Management
O w Y o n g , S in g a p o r e M a n a g e m e n t U n iv e r s ity
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Beating Earnings Threshold Targets with Earnings Management
P radyot
M ary
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M in d a k ,
S te p h a n ,

The Association

D eP aul

o f W a s h in g to n

B o th e ll

U n iv e r s ity

U n iv e r s ity

o f E a s te r n

M ic h ig a n

between National Culture and the Earnings Management:

The Study in ASEAN

Five
A ryana

S a tr y a ,

A n c e lla
R a fik a

A . H erm aw an,
Y u n ia s ih ,

D ahyang

Page

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U n iv e r s ita s

U n iv e r s ita s

U n iv e r s ita s

Ik a L e n i,

In d o n e s ia
In d o n e s ia

In d o n e s ia

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Analysing Disclosure and Implementation of Corporate Social Responsibility Practice:
Case of an Islamic Bank

N eyshia Amalina
Mahfud Sholihin
AhmadZaki

Accounting Department
Faculty of Economics and Business
Universitas Gadjah Mada, Indonesia

Prepared for the 16th Asian Academic Accounting Associatiaon Conference
Bandung, 16-18 November 2015

Correspondence:
Mahfud Sholihin
Accounting Department, Faculty of Economics and Business, Universitas Gadjah Mada
JI. Sosio Humaniora No.Ol, Bulaksumur, Yogyakarta 55281, Indonesia
Telp: +62 274 548510
Fax: +62274563212
Email: mahfud@ugm.ac.id

A n a ly s in g

D is c lo s u r e

a n d I m p le m e n ta tio n

Case

o f C o r p o r a te

o f a n I s la m ic

S o c ia l

P r a c t i c e : mlkjihgfedcbaZYXW

R e s p o n s ib ility

B ank

A b str a c t

This study aims to analyse the disclosure as well as the actual implementation of corporate
social responsibility (CSR) conducted by an Islamic Bank (hereafter The Bank). This study is
conducted by comparing the CSR disclosure and its actual implementation done by The
Bank. For the CSR disclosure, we analysed the 2012 published reports such as annual report,
audited financial statements, and report of good corporate governance practices; while for the
actual implementation of CSR, we analysed data collected via observation and interviews. In
analysing data we use six themes of Islamic Social Reporting (ISR) index as the reference.
The results of this study indicate that the disclosure of CSR activities reported by the Bank
are about 36% of the ISR Index, while its actual implementations are about 72% of the ISR
index. Generally, it implies that the disclosures as well as the actual implementation of CSR
done by the Bank do not fulfil all ISR Index.
K eyw ords
Corporate social responsibility
. Corporate social responsibility
Corporate social responsibility implementation· Islamic social reporting index

1.

disclosure

.

I n tr o d u c tio n

Corporate

social responsibility

(CSR) disclosure

in Islamic bank is one of the emerging

topics in the area of CSR which attracts researchers

to study. Among studies in the topic

which are relevant to ours are those of Maali et al. (2006) and Othman
Maali et al. (2006) have developed

a benchmark

Islamic banks. Using sample of twenty-nine
compared

the communicated

set of social disclosure

conducted

most Islamic banks. Othman & Thani (20 I 0) extended

reporting

in Malaysia.

content

index (ISR) as the benchmark,

selected companies is considered

they

is not of major concern for

Islamic Social Reporting developed

the extent of its implementation

By applying

for

by Islamic banks through annual

reports. The results of their study suggest that social reporting

companies

appropriate

Islamic banks located in sixteen countries,

social disclosure

by Haniffa (2002) to measure

& Thani (2010).

analysis

they identified

method

by S/wria-approved

listed

and using Islamic

social

that the ISR disclosure

of those

minimal.

Other studies related to CSR disclosure are those of Haniffa & Hudaib (2007) and Zaki
et al. (2014) which have explored the extent of Islamic bank corporate ethical identity (CEl)

disclosure. In Haniffa & Hudaib (2007) study, it was shown that only one of the seven banks
Clil disclosure in Arabian Gulf countries to be above average. Different result was presented
in Zaki et al. (2014) study. Using wider data derived from annual reports of Islamic banks in
Asia for the period 2006-2010,
from disparity between

three of their samples are above average and the rest suffer
Clil. The two aforementioned

the ideal and communicated

similarly used communicated

studies,

eSR as their research data.

Since most of previous studies on Islamic Bank eSR
published by the company, the implementation

used the communicated

report

or actual practice of eSR of Islamic banks is

overlooked and creates a gap in the literature. Yet, this topic is worth to study as suggested by
Haniffa & Hudaib (2007). They contend, "Future research may want to consider comparing
between

(a) actual

comparisons

and communicated

and (b) actual

and ideal ethical

identities.

Such

could provide evidence of the extent to which IBs (Islamic Banks, parentheses

added) engage in intentional

distortions

in their annual reports in efforts to enhance their

ethical identities" (p. 111).
This study is conducted to respond to such call and is different from the previous research.
This study is not merely analysing

the disclosure

of eSR

through the communicated

published by the Islamic Banks but also analysing the actual implementation
ISR index as the reference. Furthermore,
of communicated

report

of the eSR with

this study attempts to assess the degree of variation

report (as disclosed in the corporate annual report) against a benchmark of

actual eSR activities conducted by the corporation.
due to its uniqueness.

We select "The Bank" as our study object

It is the first Indonesian-foreign

Indonesia and the only Islamic bank in Indonesia

country joint-venture

Islamic Bank in

which focuses on the corporate

banking

services.
The study presented in this paper intends to answer the following questions: First, How
does The Bank disclose the information related to corporate social responsibility?

Second, are

2

those disclosed information

related to the corporate social responsibility

with the actual implementation

of corporate social responsibility

activities consistent

activities conducted by The

Bank?
The remainder

of the paper

is organised

as follows.

literature review. This section will be followed by research

Next section

is the pertinent

design. After research

findings and discussions will follow. Finally, the paper ends with conclusion,

design,

limitations, and

suggestions for future research.

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2 .1 C o r p o r a te

review ZYXWVUTSRQPONMLKJIHGFEDCBA
s o c ia l r e s p o n s ib ility

( C S R ) a n d c o r p o r a te

s o c ia l r e s p o n s ib ility

There are many definitions

related to corporate

social responsibility

acknowledged

academic

(Freeman

topic within

research

d is c lo s u r e

(CSR) as it is widely

& Hasnaoui

2011). Freeman

Hasnaoui (2011) stated that the most popular definition of CSR which attracted

significant

academic interest came from Bowen (1953, p.6). They defined CSR as "the obligations
businessmen

to pursue those policies, to make those decisions,

actions which are desirable

in terms of the objectives

definition and its coverage continuously
known as the reflection

contains of noticeably

articulated

and values

of our society".

of business

Matten & Moon (2008) specified

and communicated

CSR

First, it is currently

and the social consequences

success (Matten & Moon, 2008). Furthermore,

of

or to follow those lines of

develop due to some factors'.

of social requirements

&

that CSR

rules and practices of corporation

and

reflect business obligation for the broader society.
According to Deegan (2002) and Campbell et al. (2003) also reinforced by Farook et al.
(2011), CSR disclosure
theory,
Williams

t

legitimacy
(1999)

literature is influenced

theory,
argued

and stakeholder
that "the

broader

See Freeman and Hasnaoui (2010) for the development

by some theories such as political economy
theory.
social

Based

on political

and political

economy

environments

theory,
in which

ofCSR.

3

organizations
disclosure".

interact

Related to legitimacy

social disclosure
organisation,
confirm

are directly

represents

requires

sought and the activities
Doughlas

social and environmental

responsibility

theory on CSR disclosure

of the corporation

about the legitimacy

of an

mandate of society. Gray et a1. (1995, p. 53)
and stated, "The corporation's

the support of the stakeholders

et a1. (2004) believe

social

theory, Deegan et a1. (2000) stated that the increase in

and then achieve the continuing

existence

the level of corporate

a strategy to alter public perception

the role of stakeholder

continued

influence

adjusted

that, CSR disclosure

effects of organizations'

and their approval

to gain that approval".
is the process

economic

actions

must be
Moreover,

of communicating
to particular

the

interest

groups within society and to society at large.ZYXWVUTSRQPONMLKJIHGFEDCBA
2 .2 I s la m ic

s o c ia l r e p o r tin g

According

to Haniffa (2002), CSR disclosure

material

and moral aspects.

( I S R ) in d e x

However,

in conventional

she argued,

system only focuses on the

according

to S h a r ia

perspective,

the

spiritual aspects should be included as the main focus in CSR disclosure because it is needed
for the consideration

for decision making. Haniffa (2002) stated that Islamic social reporting

(ISR) is an extension of social reporting that encompasses
the society with regard to companies'
According

to Haniffa

not only a broader expectation

of

role in the economy but also on spiritual perspective.

(2002), ISR also serves a mechanism

in improving

transparency

of

business.
Haniffa (2002) developed
and investment,

the Islamic Social Reporting Index on five themes: finance

product, employees,

society, and environment.

While, according

(2006), the ISR index should include one more indicator, corporate governance,
the compliance
(20 I 0) revealed

of the company with the Islamic principles.
the six indicators

of ISR: investment

to Hassan
to conceive

Based on this, Othman & Thani

and finance; corporate

governance;

products and services; human resources (workers); society; and environment.

4

3.

R e s e a r c h M e t h o d ZYXWVUTSRQPONMLKJIHGFEDCBA

3 .1 T y p e a n d s o u r c e s

o f d a ta mlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

This study utilises both primary and secondary
observation

and interviews.

We interview staffs from product and development

human resources department,
development

department

data. The primary data is obtained

through

department,

and corporate banking department. The staffs from product and

are selected due to their capabilities

to explain the various products

of the bank. The human resources department is chosen due to the staffs' capability to explain
the matters related to the staffs employed in The Bank as well as the working environment.
The corporate banking department
policies given to the customers
come from the collective
manual

and

is investigated

and its related information.

labour agreement;

underwriting

due to its capability

standards

to explain fmancing

The other sources of the data

code of ethics and conducts;

guideline

in The

Bank.

These

and credit policy

documents

are not

published for the public.
The secondary

data is obtained

Bank. The 2012 communicated
report; published

from the 2012 communicated

annual report of The

annual report of The Bank consists

audited financial report; and published

corporate

of published

governance

annual

report. The

reports are available on The Bank official website.
3 .2 R e s e a r c h

o b je c t

The Bank is chosen due to the practical reason of the accessibility
related to the supporting

evidences of CSR implementation.

to access the information

Moreover, The Bank is the only

Islamic bank which focuses on the corporate banking service compared to its predecessor
Indonesia.

The Bank is also categorised

converted

from

Indonesian-foreign
3 .3 D a ta a n a ly s is

conventional

bank

as a new Islamic

into Islamic

country joint-venture

bank

bank in Indonesia

in 2010.

The

Bank

in

as it was
is the first

Islamic bank.

te c h n iq u e s

5

This study uses case study approach
communicated

in analysing

the level of concordance

CSR as well as its actual implementation

between

the

with the ISR. According to Othman

& Thani (2010), there are 43 items within 6 themes of disclosure to examine the extent of
CSR disclosure based on ISR. However, this research uses the six themes with only 36 items
of disclosure since the other seven items of disclosure are suitable only for analysing the CSR
conducted by non-financial

sectors. The seven items omitted are green products and product

safety and quality which belong
environmental

pollution;

and environmental

to the product

environmental

audit/independent

and services theme; endangered

education;

verification

environmental

wildlife;

products/process

related;

statement which belong to the environment

theme. Those seven items of disclosure are not relevant for analysing the CSR conducted by
financial sector since they are mainly discuss about the physical of the products.

Financial

sectors mainly offers services to its clients, hence it is impossible

the seven

to implement

items of disclosure.EDCBA

4.

F in d in g s

and

discussions ZYXWVUTSRQPONMLKJIHGFEDCBA

4 .1 G e n e r a l o v e r v ie w

o f th e c o r p o r a tio n

According

to The Bank annual

Moreover,

according

report (2012), The Bank is a full-fledged

to The Bank good corporate

governance

report,

Islamic bank,

(2012, p. 3), it is

described that:
"The Bank was established on October 11th, 2010. Previously, The Bank was
known as BMI as the very first Indonesian-foreign country joint venture bank.
This joint venture was started in 1995 between BMI and BNN. The bank then
converted from the conventional bank into a full-fledged sharia bank in
2010 ... "

Due to its business
branch

model, direct approach

office. The Bank focuses

(commercial)

its business

banking services. According

to customers,

strategy

The Bank does not have

on corporate

and premium

retail

to The Bank Annual report (2012), The Bank's

customers originated from various economic sectors such as service industry, manufacturing,
6

power, agriculture,

and warehousing.

which belongs to the conventional
Although

The Bank

conversion

Commonly,

corporate customer is the market segment

bank, since, The Bank was formerly a conventional

has been

already

converted

into a full-fledged

Islamic

bank.

bank,

the

does not change its market segment (The Bank Annual report, 2012). The Bank

has simple reasons for choosing the corporate and premium retail banking services as its main
focus: first, corporate

market segment is very promising;

Islamic banks which merely concentrate
Corporate Banking Department,

plantation,

with the staff from

March, 5 th 2014).

The Bank has provided

manufacturing,

there is none of other

on this segment (an interview

Due to its vision to be the preferred
segment,

secondly,

financial

66% of financing

electricity/gas/water,

service provider
portfolios

in the target market

to the real sector such as

transport/communication

and construction

(The Bank Annual Report, 2012).
CSR in The Bank refers to the relations
employees, communities
philosophy,
Relationship.

stands

operation (interview

such as customers,

and government as the regulators. The Bank employs the "TIGER"

for Teamwork,

Building

with all of its stakeholders

relationship

Integrity,
becomes

Growth,

Excellence

the basic value

and

Efficiency,

for conducting

with the staff from product and development

department,

and

day to day
March, 26 th

2014).ZYXWVUTSRQPONMLKJIHGFEDCBA

4 .2 A n a ly s is

o f c o r p o r a te

im p le m e n ta tio n )

s o c ia l r e s p o n s ib ility

b a s e d o n I s la m ic

Table 1 presents the comparison

o f T h e B a n k ( d is c lo s u r e

s o c ia l r e p o r tin g

of communicated

a n d a c tu a l

in d e x ( I S R )

CSR in The Bank for the year 2012 with

the ISR index. It can be seen that from the 36 ISR items, The Bank only discloses

13 items

(36.11 %). In a more detail analysis, according to every theme, products and services theme is
the most disclosed
governance

CSR with

theme and employee

50% followed

by society

theme

theme have the same disclosure

around

45%. Corporate

rate for about 40% while

7

finance and investment theme has 16.7%. The Bank did not disclose any information
to environmental

related

theme.

With regard to actual implementation,

The Bank implement

related activities (72%). Below are the comparison

26 out of those 36 CSR

analysis for 36 items within 6 themes of

ISR disclosure and its actual implementation.ZYXWVUTSRQPONMLKJIHGFEDCBA

A.

F in a n c e

a n d in v e s tm e n t

th e m e

The Bank reported the r ib a activities such as charging the penalties/sanctions
who are able to pay, but deliberately
agreed and not determined

to debtors

delay the payments. The amount of the penalties are not

on the contract. This information

is disclosed

in its published

financial report in the section of "summary of significant accounting policies" point 2w in the
notes to the financial

statements

concerning

qardhul

hassan

reported by The Bank comes from the current accounts
transition

period (The Bank was converted

funds. Another

with non-Islamic

into full-fledged

with other banks. The funds from these activities

qardhul hassan

According

activity

banks after the

Islamic bank in 2010). This

information is disclosed in its notes to the financial statements point 6 concerning
accounts

r ib a

the current

were used for the source of

funds.
to interview

(March 26 th, 2014), commonly,
with the non-Islamic.

with the staff from
r ib a

product

and development

department

activities in Islamic Bank occur due to the transaction

The funds from those activities become the source of q a r d h u l h a s s a n or

distributed as the CSR funds. The result of the interview related to the r ib a activities in The
Bank confirms the r ib a activity that was reported by The Bank in its published annual report.

8

Table
No.
A.

1
2

1 It
I

- -f disci
- -------

-----

I

Items

Finance

--

based
-------

---

Isl
- - - - .- - - - -

Disclosed/

of Disclosure

and

Investment

. 1 - - ..- - - -rt- - - 0

-------

Undisclosed

'd

--------

- - - -d
- - th
----

-

'd

- _ .-

----

f

--

1 .ZYXWVUTSRQPONMLKJIHGFEDCBA

- - - - - - - - - ----r----------------

Implementation

Evidences

of the Actual

Implementation

Theme

R ib a activities
G lia r a r

./

./

Interview

x

./

Interview

and example

of letter of offer for term financing

iB- I s tis h n a
Z a k a t: method

3

x

x

Interview

x

./

Credit

used/amount/beneficiaries
4

Policy

on late repayments

insolvent

clients/bad

and

debts

written-off
5

Current

manual

the problem

restructuring

and point

x

x

-

x

x

-

of the product

./

./

complaints/incidents

x

x

-

./

./

The existence

value

balance

sheet

and underwriting

9 concerning

standards

management,

9.3 about

guideline

section

point 9.2 about

write off

(CVBS)

6

Value
B.

added

Products

and

statements
Services

7

H o le d status

8

Customer

of non-compliance
regulation

(VAS)

Theme
Example

of letter of offer for term financing

iB - ls tis h lla

with

and voluntary

codes

(if any)
C.
9

Corporate
S h a r ia

Governance
compliance

Theme
status

the independent
10

Ownership

structure:

of Muslim

shareholders

number

x

x

-

x

./

Interview

./

./

of S h a r ia supervisory
auditor's

board's

opinion

and

report

and its

shareholdings

11

BOD

structure-Muslim

non-Muslim

12

Declaration
activities:

vs.

members
of forbidden

Code of ethics

and conducts

,

monopolistic

practice/hoarding

necessary

9

No.

Items of Disclosure

Disclosed/
Undisclosed

Implementation

Evidences

of the Actual Implementation

goods/price
manipulation/fraudulent
business practice/gambling
13
Anti-corruption policies
D. Employees Theme
14
Nature of work: working
hours/holidays/other
benefits

x

./

Code of ethics and conducts

x

./

15

Education and training/human
capital development

./

./

16

Equal opportunities

./

./

17
18

Employee involvement
Health and safety

./

./

x

./

19
20

Working environment
Employment of other specialinterest-group (i.e.
handicapped, ex-convicts,
former drug-addicts)
Higher echelons in the
company perform the
congregational prayers with
lower and middle level
managers
Muslim employees are allowed
to perform their obligatory

./

./

The Bank collective labour agreement chapter IV about
working hours, permit, and leave; chapter V about wages;
chapter VI about allowances and welfare facilities, and
chapter X about employee loans facilities
Schedule of in-house training 2012; collective labour
agreement chapter IX article 50 about education and
training
Schedule of in house training 2012; The Bank collective
labour agreement chapter IV article 14 concerning the
holidays granting
Schedule of in house training 2012
The Bank collective labour agreement chapter VII about
health insurance
Interview

x

x

-

x

./

Interview

x

./

The Bank collective labour agreement chapter IV, article
11, point 2

21

22

10

Items of Disclosure

No.

Disclosed/
Undisclosed

Implementation

prayers during specific times
and fasting during ZYXWVUTSRQPONMLKJIHGFEDCBA
R a tn a d lta n
on their working day
23
Proper place of worship for the
x
employees
E. Society Theme

24
25
26
27
28
29
30
31
32
33
34

S a d d a C ja /d o n a tio n

./

Evidences

./

Photos

./

Photos

W aq(

x

x

-

Q ard H assan

./

./

./

./

Interview
Photos

x

x

-

x

./

./

./

x
x

./

./

./

Interview
Photos
Photos
Photos
Photos

x

x

-

./

-

Employee volunteerism
Education: school adoption
scheme/scholarships
Graduate employment
Youth development
Underprivileged community
Children care
Charities/gifts/social
activities
Sponsoring public
health/recreational
project/sports/cultural
events

Environment
Theme
Conservation of environment
x
Environmental Management
x
System/Policy
Total items of disclosure
Total activities implemented
Note: "./" refers to an availability of disclosure or implementation

./

of the Actual Implementation

F.

35
36

x

13/36 (36.11 %)
26/36 (72.22%)
while "x" refers to their absence

11

Related to ZYXWVUTSRQPONMLKJIHGFEDCBA
g h a r a r and z a k a t disclosure, in 2012, The Bank did not report any g h a r a r
transaction as well as any activities
Bank added

related to the collection

in the notes to the financial

statement

and distribution

point 2 concerning

of z a k a t. The

the summary

of

significant accounting policies, that in 2012 and 2011, The Bank has not restricted investment
management and has not begun z a k a t distribution activities.
However, an interview with the staff from corporate banking department
2014) reveals that one of the g h a r a r - iie e

activity

conducted

existence of ceiling price in the term financing iB - I s tis h n a .

(March 25 th,

in The Bank is through

The ceiling price is the maximum

financing cost which is already agreed on the signing date of the facility agreement
financing cost will be not influenced
conventional

by the fluctuation

the

in the market). In contrary,

(the
in the

bank, the financing cost is subject to review which means the financing

cost

will be highly influenced by the fluctuation of the interest rate in the market.
In relation to z a k a t, as The Bank has just finished the full conversion
conventional

bank into the Islamic

activities related to the collection

bank in 2012, The Bank has not yet conducted

or distribution

of z a k a t including

the collection

from the employees. The Bank has just started the periodic distribution
which zakat is calculated as 2.5% of company's
not yet conducted

the collection

process from the

of z a k a t

any

of z a k a t

of zakat in 2013 in

earnings. However, up to date, The Bank has

from

its employees

(interview with the staff from product and development

like other

Islamic

banks

department on March 26 th, 2014)

Furthermore, the Bank through their published annual report did not explain clearly the
policy on late repayments
repayments

and insolvent

and insolvent clients/bad

manual & underwriting

standards

clients.

However,

debts write-off

guideline

The Bank has policy on late

which is written in the credit policy

for The Bank. In Chapter

management, section 9.2 concerning the restructuring,

9 about problem

it is explained that The Bank considers

restructuring problem financing as remedial or rehabilitation

action for which have difficulty

12

in fulfilling their obligation but still have potential business prospect and payment capability
after the financing is restructured.

In the case of write off, it is also explained

financings can only be written off after classified as loss and full provisions

that impaired
is made to the

exposure (Chapter 9, section 9.3).
In addition, The Bank through its 2012 published

annual report did not disclose any

information related to current value balance sheet (CVBS) as the information

related to the

value added statements is not available.ZYXWVUTSRQPONMLKJIHGFEDCBA

B.

P r o d u c ts a n d S e r v ic e s

Them e

According to The Bank annual report (2012), The Bank has four types of banking products
and services which already adjusted with the S h a r ia principles:

deposit products,

financing

products, trade financing products, and foreign exchange transaction service.
The deposit products

in The Bank consists

of cunent

account

iB which

IS

a base

demand deposit product; saving account iB which is a saving account product; and "deposito
iB" which is a profit sharing-based

time deposit with competitive

report, 2012). These all deposit products already adjusted
Financing Products
(2012), the Term

consist

of term financing

Financing

provided to corporate and commercial
m urabahah

(sales and purchase),

purchase) and diminishing

the most widely products distributed

financing

to The Bank annual
facility

or project

clients. This term financing iB is conducted

is th is n a

m usharakah

with the S h a r ia principles.

iB. According

iB is an investment

return (The Bank annual

(indent),

ija r a h

m u n ta h iy a

b itta m lik

The
report

financing
based on
(lease-to-

scheme financing. This financing product is one of
to the public since the market segment of The Bank

focuses on the corporate and premium retail customers.
The third product of The Bank is the trade financing product which becomes one of the
strengths of this bank. According to The Bank annual report (2012), The Bank offers funded
and non-funded

facility in trade finance products. The trade financing

products

consist of
13

letter of credit

iB, import/local

purchase

financing

iB, export

financing

iB, and bank

guarantee iB. The last, service offered by The Bank namely as foreign exchange transaction
services for foreign exchange transaction in various currencies.EDCBA

service offers comprehensive

I n this study, the example

provided

belongs to one of the The Bank's

for the halal product is the letter of offer which

products

which is the term financing ZYXWVUTSRQPONMLKJIHGFEDCBA
iB -Is tis h n a .
Term

financing iB -Is tis l1 1 1 a is one of the halal products since the financing schemes in this product
does not consist of uncertainty or ambiguity ig h a r a r - free).
The Bank did not disclose any information related to the customer complaints in 2012.

C.

C o r p o r a te g o v e r n a n c e

th e m e

The Bank's S h u r ia compliance
S h a r ia

opinion

supervisory

status is represented

by the existence of the opinion from the

board (SSB) and the independent

of supervisory

board

is disclosed

auditor's

in its published

report. In The Bank, the
annual

report,

while,

the

independent auditor's report is disclosed in the published audited financial report.
In more details, the S lia r ia compliance
guide business operation.
12.0 concerning

policy is broken down into regulations

One of the regulations

the required

knowledge

is the code of ethics and conducts,

and compliance.

level, should keep up to date and comply with the applicable
their respective

area

of operations.

Moreover,

according

Staff, particularly

which
article

at the senior

laws, rules, and regulations
to credit

policy

in

&

manual

underwriting standards guideline for The Bank, chapter 2, point 2.2, it is explained

that all

business activities must be in compliance with applicable S lia r ia law and principles which are
monitored by the compliance department. This department is led by a director of compliance.
Related to ownership

structure, it is clearly known from the annual report that the 99%

of The Bank shares belong to the first group owner and the other 1% of shares belongs to
another. The shares of The Bank are hold by the corporation
no information related to the number of Muslim shareholders

(not individual).

Thus, there is

and its shareholdings.
14

In term of board of directors'

structure (BOD), even though The Bank disclosed

information related to the brief profile of its BOD members
report, there is no specific

information

related

in its 2012 published

to the religion

of each BOD

However, an interview with the staff from human resources department
revealed that The Bank's

the

annual

members.

(March, 25 th 2014)

BOD consists of 3 members who are Muslims. The structure of
towards the ZYXWVUTSRQPONMLKJIHGFEDCBA
S h a r ia principles in daily

Muslim BOD in The Bank supports the compliance
operation.

Furthermore, The Bank through its 2012 published

good corporate

governance

report

disclosed that there were no fraudulent business practices during 2012. The detail regulation
about forbidden activities

are explained

prohibition to engage in any business

in the code of ethics and conducts
activity that competes

or conflicts

related to the

with the bank's

interest or misuse the name of the bank for private interest. The use of the bank's name for
the private interest could lead to the fraudulent activities. That regulation

is explained

in the

code of ethics and conducts article 1.0 concerning the conflict of interest.
The last item in this corporate
Although

The

Bank

disclosed

prevention of financing
disclose any specific

information
conducts

governance

information

terrorism

information

program
related

related to the anti-corruption

such as the article

entertainments

and gifts

from

(d) which

theme is related to anti-corruption

related

to the

anti-money

policy.

laundering

and

in its 2012 annual report, The Bank did not
to the policy
policies
guides

the customers

of the anti-corruption.

is provided
the prohibition

where

The detail

in the code of ethics and
of receiving

the gifts or benefit

the costly

result

from

a

relationship with the customer arising in the ordinary course of duties in the bank or as a
result of services rendered by the staff as a representative
The Bank shall avoid the provision of entertainment

of the bank. Moreover, the staff of

and gift to government officials.

15

D.

E m p lo y e e s

th e m e mlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

In relation to the employee

theme,

especially

on nature of work, The Bank through

its

published annual report did not disclose any information related to the nature of work such as
working hours, holidays, or other benefits. The Bank explains these issues in The Bank's
collective labour agreement.
The Bank's collective labour agreement chapter IV explains about the working hours,
permits, and holidays. The Bank also determined the regulation related to the overtime hours
in Saturday/public

holidays. The regulations

related to the overtime works are explained

in

the article 13 concerning the overtime works while article 14 mainly explains about the aims
of holidays granting for the employees to recover their physical and spiritual health in order
to increase the employees'

productivity.

Each of the staff is entitled for the holidays after the

trial period of three months.
The wages regulation is explained in chapter V, in which it explained that, the company
will deliver the salary
gratification/bonus

on the 22 nd

day of each

month.

Moreover,

the salary

scales,

and income tax are explained in article 22, 24, and 25 respectively.

The

next chapter, chapter VI explains about the allowances

and welfare facilities. In chapter VI,

article 26, it explains about the food and transportation

allowances.

about feast and end of year allowances.

In chapter 27, it explains

In chapter X, it explains about the employee

facilities. The employee loans facilities consist of mortgage

loan/renovation,

loans

vehicle loans,

and emergency loans.
Related to employee education and training, it is disclosed that The Bank spent 5% of
the personnel costs for employee

training purposes.

were assigned to attend the credit skill assessment

In 2012, its corporate

banking officers

course in Kuala Lumpur, Malaysia.

2012, The Bank also held an event namely as team bui lding effectiveness

In

in Bali in order to

16

enhance the solidity of teams and kinship among the staffs from all levels. This information
was disclosed in its published annual report in the section of human resources.
In more detail, regulation about education
The Bank's collective

labour agreement

article 50 about the education

article, it explains about the equal opportunity
house training and the external
transport and accommodation
part offacilities

and training is explained

training.

allowances

in detail through

and training. In this

given to all the employees to join both the in-

Moreover,

in this article,

it explains

about the

as well as the over hours and food allowances

as

included in education and training program.

The Bank through its published annual report did not mention explicitly about the equal

opportunities given to all employees. Nevertheless, The Bank in the human resources section
of its published annual report mentioned

about the personnel costs spending for employees

training purposes in which employees are encouraged to attend seminars, trainings, and short
courses in both local and overseas. Moreover, The Bank also organized an event which was
attended by all staffs including the board of commissioners
The evidences

related

to the equal opportunities

and board of directors.
given

Schedule of in-house training in 2012 and The Bank's collective
IX, article 50 concerning
equal opportunities

are the

labour agreement,

chapter

the education and training in which, it mainly explains about the

given to all employees

both in-house and external
given to the employees

to the employees

training.

to join with the education

The next evidence

is chapter IV article

and training program

related to the equal opportunities

14 concerning

the holidays

granting.

In this

article, it explains that each of the staff is entitled for the holidays after the trial period of
three months and the holidays are granted prorated.
Related to health and safety, The Bank through its 2012 published annual report did not
disclose any information

related to health and safety mechanism

did not provide any information

related to the employment

of the employees

as it also

of other special interest group

17

such as handicapped,

ex-convicts, former drug-addicts

detail about the health and safety mechanism
chapter

VII. Article

mechanism
about

32 point

through

1, 2, and 3 explain

of the married and single employees.

the mechanism

treatment,

of health allowances

eyes examination,

staffs. However, The Bank explains in
its collective

labour agreement

about the general

Moreover,

for hospital

regular health check-up,

clauses

this agreement

costs,

for health

also explains

labour allowances,

hepatitis

vaccination,

in

dental

and working

accidents. These all regulations are regulated in the article 33-40.
Furthermore,
its 2012

even though The Bank did not explicitly report working environment

a nnua I report, information

corporate

governance

GCG. According
1