Customers' Perception of Ethical Issues in Corporate Governance of Islamic Banks in Bangladesh

CUSTOMERS PERCEPTION OF ETHICAL
ISSUES IN CORPORATE GOVERNANCE

OF ISLAMIC BANKS IN BANGLADESH
i
CUSTOMERS PERCEPTION OF ETHICAL ISSUES IN CORPORATE
GOVERNANCE OF ISLAMIC BANKS IN BANGLADESH
Submitted to:
Dr. Muhammad Ziaulhaq Mamun
Professor
Course Instructor: Research Methodology
Institute of Business Administration
University of Dhaka
Submitted by:
Group 3
Nandita Hore (RH-67)
Rezwan Arefin (ZR-75)
Sawmik Islam (ZR-78)
Ishmamul Farhad (ZR-81)
M. Samiul Haque (ZR-84)
Saifur Rahman (ZR-89)
Wasif-A-Khoda (ZR-104)
Lamia Hossain (RH-105)
Zahin Azad Moslem (ZR-121)
Batch: 20th, Section: B
University of Dhaka
6 July 2014
ii
6 July 2014
Dr. Muhammad Ziaulhaq Mamun

Course Instructor: Research Methodology
University of Dhaka
Dear Sir:
Subject: Submission of the Report assigned in Research Methodology course
Here is the report on Customers Perception of Ethical Issues in Corporate Governance of

Islamic banks in Bangladesh which you assigned us as a requirement of the course Research
Methodology (K301) offered at the Institute of Business Administration, University of
Dhaka. The report includes an overview of the customers perception of the ethical issues in
corporate governance of Islamic Banks in Bangladesh, followed by a research conducted on
this topic. For the research, surveys of 80 account holders have been taken and the results
have been analyzed using statistical tools and tests.
The report has been prepared under your authorization and direct supervision, with the
purpose of fulfilling the course requirement. No part of this report shall be reproduced for use
in any other form of publication in future without your written permission.
We appreciate the opportunity to prepare a research paper that you have given us, which has
been a unique learning experience and the knowledge we have acquired will be of great
importance to us, both for our future academic purposes and professional lives.
Yours sincerely,
Nandita Hore (RH-67) Rezwan Arefin (ZR-75) Sawmik Islam (ZR-78)
Ishmamul Farhad (ZR-81) M. Samiul Haque (ZR-84) Saifur Rahman (ZR-89)
Wasif-A-Khoda (ZR-104) Lamia Hossain (RH-105) Zahin Azad Moslem (ZR-121)
Batch: 20th, Section: B

University of Dhaka
iii
ACKNOWLEDGEMENT
Firstly, we would like to thank Dr. Muhammad Ziaulhaq Mamun for giving us the
opportunity to embark on a learning experience that helped us become aware of the ethical
issues in corporate governance of Islamic Banks. Though it was a challenge for us to conduct
a research of this magnitude and analyze the findings, it was rewarding at the same time. This
research paper enabled us to apply what we had learnt in class and acted as an eye opener. It
made us aware of the ethical issues in Islamic Banks and how customers perceived it.
Secondly, this research paper would not have been possible without the cooperation of the
account holders of these Islamic banks. They were kind enough to take time out of their busy
schedules and fill up these questionnaires which enable us to conduct our research. Their
invaluable insight was definitely the foundation of this endeavor.
We would like to express our utmost gratitude, again, towards our course instructor,
Professor Dr. Muhammad Ziaulhaq Mamun, for his guidance in dealing with the topic issue
and for his insights. He guided us throughout the entire duration of our writing and answered
all of our queries. He also provided valuable insight in respect to our survey and directed us
on the relevance of it to our report topic.
iv
EXECUTIVE SUMMARY
Since the establishment of Islami Bank Bangladesh Limited in 1983, the Islamic banking
sector of Bangladesh has seen a notable growth. There are currently eight full-fledged Islamic
banks operating in the country and a number of conventional banks having Islamic windows.
Islamic banks usually market themselves as providers of ethical financial services, but they
do not often spell out explicitly what is meant by this or its significance. The word ethical
is used as a label, and associated with Islam, but there is seldom any attempt to make the link
between what is ethical and the specific methods of conducting financial transactions.
This study, therefore, attempts to find out the perception of customers of Islamic banks
regarding the ethical issues in corporate governance of such banks. To gain insight into the
matter, it is imperative to research on the ethical issues of the Islamic banks. The research
problem which we have identified is whether there are discrepancies between corporate
governance practices and the ethical standards maintained by the Islamic banks in
Bangladesh, according to the Islamic bank account holders.
The objectives of this study have been separated into two parts: the broad objective and three
specific objectives. The aim of the broad objective is to answer the research question and the
specific objectives have been designed in a way so that the precise aspects of the broad
objective can be analyzed. The three specific objectives are three parameters of this research,
each consisting of more than one complex variables. There are a total of forty-six simple
variables under seven complex variables. Based on each of these simple variables, questions
were formed and these questions together made up the questionnaire used in the survey. The
Likert scale was applied in the questionnaire.
The population of the study comprises of all the Islamic bank customers in Bangladesh.
However, no such comprehensive list of customers is available. Such a comprehensive list of
customers would require all Islamic banks to reveal their customers list along with the
customers contact details, which is not possible due to reasons of confidentiality. Hence, the
study adopted a non-probability sampling method, whereby a total of 80 respondents were
chosen on convenience basis. Data was analyzed in SPSS using several data analysis
techniques, like- frequency analysis, ANOVA test, t-test, regression analysis and factor
analysis.
The analysis of the data collected through the survey of Islamic bank account holders led to
some conclusive findings. The main five findings showed that-
1) Majority of the customers are aware of the corporate governance structure and
competence of the Islamic banks. They agreed to the statements that the board of
directors and Shariah Supervisory board members are sufficiently qualified, but they are
unaware of these boards composition. They also responded positively to the aspects that
these boards members are responsible in ethical decision making, yet remained neutral to
whether they are independent and accountable.
v
2) Majority of the customers are also aware whether their bank is compliant to Shariah rules
or not. Though they strongly agreed that their bank follow the Shariah rules, such as- no
payment and receipt of interest, involvement in speculative activities, haram service or
product, payment of profit-free loans and zakaah, customers are unaware of the roles of
regulatory bodies in Islamic financing, such as- Islamic Financial Services Board (IFSB)
and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
3) Customers think their bank is ethical in social reporting and the bank takes adequate
measure to notify the customers about disclosed information. Customers responded
positively to the statements that their banks are transparent in conflicts and are socially
responsible. Respondents agreed that the bank sends them the invitation to annual general
meetings. But they are neutral to the statements that they check newspaper, banks
website or e-mails for price-sensitive information of their bank.
4) Customers overall perception towards ethical standards maintained by Islamic banks in
corporate governance is positive. They agreed to the statement Overall my bank is
ethical in corporate governance but did not strongly agree to it.
5) Other factors, such as- age, gender, income, level of education etc. do not affect
customers perception towards overall ethical standard in corporate governance. The only
factor that was found to have an effect on overall perception was formal Islamic
education background. Respondents with formal Islamic education background are more
aware of the ethical issues of corporate governance than others.
So, from this research we can conclude that the account holders of the Islamic banks in
Bangladesh are aware of the ethical issues in corporate governance of their banks.
vi
TABLE OF CONTENTS
Title Fly....................................................................................................................................... i
Title Page ...................................................................................................................................ii
Letter of Transmittal ................................................................................................................ iii
Acknowledgement .................................................................................................................... iv
Executive Summary ................................................................................................................... v
1.0 Introduction .......................................................................................................................... 1
1.1 Origin of the Report ......................................................................................................... 1
1.2 Research Background ....................................................................................................... 1
1.3 Problem ............................................................................................................................ 2
1.4 Research Question ............................................................................................................ 3
1.5 Objectives ......................................................................................................................... 3
1.5.1 Broad Objective ......................................................................................................... 3
1.5.2 Specific Objectives .................................................................................................... 3
1.6 Hypotheses ....................................................................................................................... 3
1.7 Rationale........................................................................................................................... 5
1.8 Scope ................................................................................................................................ 5
1.9 Limitations ....................................................................................................................... 5
2.0 Methodology ........................................................................................................................ 6
2.1 Data Collection ................................................................................................................. 6
2.1.1 Primary Data Collection ............................................................................................ 6
2.1.2 Secondary Data Collection ........................................................................................ 6
2.2 Sampling Method ............................................................................................................. 7
2.3 Sample Size ...................................................................................................................... 7
2.4 Sample Frame ................................................................................................................... 8
2.5 Questionnaire Development ............................................................................................. 8
2.6 Validity ............................................................................................................................. 9
2.7 Reliability of Data ............................................................................................................ 9
3.0 Literature Review............................................................................................................... 11
4.0 Data Analysis and Findings ............................................................................................... 13
4.1 Parameter 1- Corporate Governance Structure and Competence................................... 13
4.1.1 Categorical Response Index .................................................................................... 13
4.1.2 Means of Complex Variables and Parameter 1 ....................................................... 17
vii
4.1.3 Hypotheses Testing for Parameter 1 ........................................................................ 17
4.2 Parameter 2- Compliance to Shariah Rules.................................................................... 20
4.2.2 Means of Complex Variables and Parameter 2 ....................................................... 24
4.3 Parameter 3- Ethical Disclosure of Information ............................................................ 26
4.3.2 Means of Complex variables and Parameter 3 ........................................................ 31
4.4 Overall Perception towards Ethical Standards in Corporate Governance ...................... 34
4.5 Factor Analysis ............................................................................................................... 35
4.6 KMO and Bartletts Test ................................................................................................ 38
4.7 Regression Analysis ....................................................................................................... 38
4.8 Other Factors Related Hypothesis Testing ..................................................................... 41
4.8.1 Determining Association Using Bivariate Analysis (Chi Square Test) .................. 41
4.8.2 Determining Correlation Using Bivariate Analysis (Correlation Test) ................... 45
5.0 Conclusion ......................................................................................................................... 50
Notes ........................................................................................................................................ 51
Appendix 1: Operationalization of Variables .......................................................................... 52
Appendix 2: Survey Questionnaire .......................................................................................... 54
Appendix 3: SPSS Output........................................................................................................ 57
References ................................................................................................................................ 61
viii
LIST OF TABLES
Table 1: Reliability Statistics (Cronbachs Alpha) 9

Table 2: Reliability Statistics (Cronbachs Alpha and Split-half Technique) 9
Table 3: Frequency of Responses for Parameter 1 13
Table 4: One Sample t-test for Categorical Response Index 14
Table 5: t-test Interpretation 16
Table 6: Means of Complex Variables and Parameter 1 17
Table 7: SPSS Findings 18
Table 22: Frequency of Responses 34
Table 24: Total Variance Explained (Partial) 35
Table 25: KMO and Bartletts Test 38
Table 26: Model Summary (R, R Square and Adjusted R Square) 38
Table 27: ANOVA 39
Table 28: Co-efficients 40
Table 29: Chi-square Test for Age and Overall Perception towards Ethical Standards Chi- 41
Square Tests
ix
Table 30: Chi-Square Test for Gender and Overall Perception towards Ethical Standards 42
Table 31: Chi-Square Test for Average Monthly Income and Overall Perception towards 43
Ethical Standards
Table 32: Chi-Square Test for Level of Education and Overall Perception towards Ethical 43
Standards
Table 33: Chi-Square Test for Formal Islamic Education Background and Overall 44
Perception towards Ethical Standards
Table 34: Chi-Square Test for Length of relationship with Islamic Bank and Overall 45
Table 35: Correlation between Age and Overall Perception towards Ethical Standards 45
Table 36: Correlation between Gender and Overall Perception towards Ethical Standards 46
Table 37: Correlation between Average Monthly Income and Overall Perception towards 47
Ethical Standards
Table 38: Correlation between Level of Education and Overall Perception towards Ethical 47
Standards
Table 39: Correlation between Formal Islamic Education Background and Overall 48
Table 40: Correlation between Length of relationship with Islamic Bank and Overall 49
Table 41: Coordination Schema 52
x
1.0 Introduction
1.1 Origin of the Report
This report titled Customers perception of ethical issues in corporate governance of Islamic
banks in Bangladesh has been prepared as a requirement for the completion of the course
Research Methodology under the supervision of our course instructor Professor
Dr. Muhammad Ziaulhaq Mamun, Institute of Business Administration, University of Dhaka.
1.2 Research Background
Islamic Banking in Bangladesh
Bangladesh entered the Islamic banking system only in 1983, with the establishment of
Islami Bank Bangladesh Ltd. and since then, the Islamic banking sector has seen an
impressive growth. There are currently eight full-fledged Islamic banks operating in the
country and a number of conventional banks having Islamic windows. Islamic banks conduct
their activities based upon Islamic law (Shariah), which reflect the teachings of Islam. This
religious framework encompasses four major principles, which are the prohibition of
payment or receipt of interest (riba), the avoidance of involvement in speculative activities
(gharar), the prevention of investing in Islam-banned (haram) products or services such as
gambling, and payment of charity (zakah). The Islamic banks also operate under a socio-
economic framework which is based on the principles of socio-economic development, social
justice and social welfare that are achieved by mobilizing Shariah-compliant savings and
investment. This framework encourages the profit-loss sharing (PLS) principle which
represents the core of Islamic finance. The PLS principle promotes risk-sharing between
lender and borrower, as well as ensuring equal distribution of wealth and the attainment of
social justice. Trust finance (mudarabah) and equity participation (musharakah) contracts
represent the primary financial instruments which are based on the PLS principle. Non-PLS
modes of Islamic finance also exist, which possess pre-determined and fixed rates of return.
Examples include cost-plus financing (murabahah), leasing (ijaarah), leasing and purchasing
(ijaarah wa iqtinaa), and forward sale (bay salam).
Corporate Governance and Shariah Compliance
The Organisation for Economic Co-operation and Development (OECD, 2004) defines
corporate governance as a set of relationships between a companys management, its board,
its shareholders and other stakeholders which provides the structure through which the
objectives of the company are set, and the means of attaining those objectives and monitoring
performance are determined. The philosophical foundation of corporate governance in Islam
requires an additional layer of governance for the purpose of Shariah compliance. Therefore,
a specific characteristic in the governance structure of Islamic banks, in contrast to
conventional banks, is the Shariah Supervisory Board (SSB). It exists in addition to typical
bank board governance structures, but its functions are mainly to certify (ex-ante) and to
1
monitor (ex-post) all financial contracts, transactions, and further activities of a bank on
behalf of shareholders, stakeholders, and clients to ensure that they are compliant with the
Shariah. The SSBs comprise of Shariah scholars or a committee of Fiqh al-Muamalat
(religious) scholars. The Shariah board plays the dual role of supervision and consultation.
Islamic banks employ Islamic scholars on an advisory or consultancy basis to ensure that the
banks policies and activities comply with Shariah rulings. The ulamas have played a crucial
role in the movement of Islamic finance and investment. They observe sources of the Islamic
law and from these derive the principles of Islamic finance and investment.
As the nature and model of Islamic finance are different with the conventional counterparts,
the need for a standard-setting agency specifically for the Islamic finance was crucial and
hence, with the initiative of several Islamic Financial Institutions (IFIs) and regulatory
authorities, the Accounting and Auditing Organization for Islamic Financial Institutions
(AAOIFI) and the Islamic Financial Services Board (IFSB) were established in 1992 and
2004 respectively. The AAOIFI has issued five governance standards while the IFSB has
issued three Prudential Standards and one guiding principles on the governance in IFIs. The
difference between the IFSB Prudential Standards and the AAOIFI Governance Standards is
that the IFSB approach is more concerned towards regulators while AAOIFI, to individual
IFIs.
Ethics in Islam
The word ethics is derived from the Greek word ethos, which means character or custom. It
represents a wide meaning of character, behavior or code of conducts. In Islam, the word
ethics is synonym with the term adab and khuluq (Siddiqui, 1997). These two terms denote
good behavior or a standard of conduct to be observed in social interactions or the set of
moral principles that distinguish right and wrong. Islamic model of corporate governance
advocates a comprehensive approach by emphasizing the elements of ethics as propounded in
the Holy Quran, hence the Islamic ethical principles are divine and religious construct.
1.3 Problem
Islamic banks usually market themselves as providers of ethical financial services, but they
do not often spell out explicitly what is meant by this or its significance. The word ethical
is used as a label, and associated with Islam, but there is seldom any attempt to make the link
between what is ethical and the specific methods of conducting financial transactions.
However, if Islamic banks are to capture customer bases, then they have to be convincing and
persuade potential clients that there are worth switching to. For Islamic banks, it is important
to stress the unique quality of the services they provide rather than compete on price. This
means they have to be believable, and be able to engage the customer by appealing to his or
her conscience.
Having a Shariah Supervisory Board of respected Fiqh al-Muamalat scholars who can
endorse the banks activities is seen as crucial to ensure the institutions reputation. In their
publicity material, however, there is little attempt to explain the ethical merits of how the
2
bank conducts its business directly to the clients. Although, Islamic banks primarily attract
clients because of their religious beliefs, merely stating that a product is Shariah compliant is
insufficient. Islamic banks need to be more closely engaged with their clients and make them
aware of the corporate governance structure through which the bank conducts its business.
There is a need for Islamic banks to appeal to the intelligence as well as the beliefs of the
client. This study, therefore, attempts to find out the perception of customers of Islamic banks
regarding the ethical issues in corporate governance of such banks. To gain insight into the
matter, it is imperative to research on the ethical issues of the Islamic banks. The research
problem which we have identified is whether there are discrepancies between corporate
governance practices and the ethical standards maintained by the Islamic banks in
Bangladesh, according to the Islamic bank account holders.
1.4 Research Question
What is the customers perception of ethical issues in corporate governance of Islamic banks
in Bangladesh?
1.5 Objectives
The objectives of this study have been separated into two parts: the broad objective and three
specific objectives. The aim of the broad objective is to answer the research question and the
specific objectives have been designed in a way so that the precise aspects of the broad
objective can be analyzed.
1.5.1 Broad Objective
The broad objective of the study is to find out the customers perception on ethical issues in
corporate governance of Islamic banks in Bangladesh.
1.5.2 Specific Objectives
Specifically, this study will look into:
a) Awareness of customers about the corporate governance structure and competence of

Islamic banks
b) Perception of the customers about the level of compliance of Islamic banks with Shariah
rules
c) Knowledge of the customers regarding ethical disclosure of information by Islamic banks
1.6 Hypotheses
The hypotheses pertaining to each specific objective are given below:
Parameter 1: Corporate governance structure and competence of Islamic banks
Hypothesis1: Customers are aware of the corporate governance structure and competence of
the Board of Directors.
3
Hypothesis 2: Customers are aware of the corporate governance structure and competence of
the Shariah Supervisory Board.
Hypothesis 3: Customers are aware of the corporate governance structure and competence of
the Top Management.
Parameter 2: Compliance of Islamic banks to Shariah rules
Hypothesis 4: Customers think that their respective banks are compliant to Shariah rules.
Hypothesis 5: Customers think that regulatory bodies have an influence on the compliance by
their respective banks.
Parameter 3: Ethical disclosure of information by Islamic banks
Hypothesis 6: Customers think that their respective banks are ethical in corporate and social
reporting.
Hypothesis 7: Customers think that their respective banks take adequate measures to notify
them about disclosed information.
Other Factors Related Hypotheses
Hypothesis 8: Respondents age and overall perception towards ethical standard are not
associated
Hypothesis 9: Respondents gender and overall perception towards ethical standard are not
associated
Hypothesis 10: Respondents average monthly income and overall perception towards ethical
standard are not associated
Hypothesis 11: Respondents level of education and overall perception towards ethical
standard are not associated
Hypothesis 12: Respondents formal Islamic education background and overall perception
towards ethical standard are not associated
Hypothesis 13: Respondents length of relationship with the bank and overall perception
towards ethical standard are not associated
Hypothesis 14: There is correlation between respondents age and overall perception towards
ethical standard
Hypothesis 15: There is correlation between respondents gender and overall perception
towards ethical standard
Hypothesis 16: There is correlation between respondents average monthly income and
overall perception towards ethical standard
4
Hypothesis 17: There is correlation between respondents level of education and overall
perception towards ethical standard
Hypothesis 18: There is correlation between respondents formal Islamic education

background and overall perception towards ethical standard
Hypothesis 19: There is correlation between respondents length of relationship with the bank
and overall perception towards ethical standard
1.7 Rationale
The growth of Islamic financial institutions in Bangladesh, especially the Islamic banking
sector is currently witnessing a tremendous momentum as a result of growing customer
interests due to the unique religious value proposition of such institutions. Ethics is an
integral component of Islamic banking and one of the major determinants of customer
patronage. The corporate governance structure and Shariah compliance of Islamic banks also
play important roles in positioning such institutions in the minds of the customers. This
academic study is therefore a well-timed and appropriate initiative to understand the
awareness of customers regarding the ethical issues facing the corporate governance of
Islamic banks. This research paper will help to clarify the ethical standards in corporate
governance to the current customers of Islamic banks as well as to the general public. The
Islamic banks will also benefit from the report, as this will help them understand their
laggings in understanding customer expectations.
1.8 Scope
The scope of this research is limited to 80 customers of the 8 fully-fledged Islamic banks in
Dhaka City, namely, Islami Bank Bangladesh Ltd, Al-Arafah Islami Bank Ltd., Social
Investment Bank Ltd., EXIM Bank Ltd., Shahjalal Islamic Bank Ltd., First Security Islami
Bank Ltd., ICB Islamic Bank and Union Bank Ltd. Respondents from each bank is chosen
on convenient/accidental basis and approached at the counters of these 8 Islamic banks.
1.9 Limitations
The limitations of this research are given below:
Sample Size: The sample size of 80 respondents is quite small compared to the total
population of Islamic bank customers in Bangladesh
Geographical Limitation: The study was conducted only in Dhaka, which may not
give a holistic view of the perception of all the Islamic bank customers across the
country
Availability and Accessibility of Information: Information pertaining to corporate
governance is sensitive in nature and, therefore, may not be easily available or
accessible
Lack of Prior Research: No literature is available on individual customers perception
about ethical issues in corporate governance of Islamic banks. Some literature is
5
available on the corporate governance structure of Islamic banks and customers
attitude regarding selection criteria of Islamic banks
Time: Lack of time has prevented us from enlarging the scope of the study
2.0 Methodology
2.1 Data Collection
For the completion of this research paper, both primary and secondary sources of information
have been used.
2.1.1 Primary Data Collection
The primary sources of information include the general public, or more appropriately the
account holders of the Islamic banks in Bangladesh. Surveys based on questionnaires have
been carried out on a sample of customers. Data required for fulfilling the objectives of the
study were collected from 80 customers approached at the counters of the following 8 Islamic
banks in Dhaka city, namely, Islami Bank Bangladesh Ltd, Al-Arafah Islami Bank Ltd.,
Social Investment Bank Ltd., EXIM Bank Ltd., Shahjalal Islamic Bank Ltd., First Security
Islami Bank Ltd., ICB Islamic Bank and Union Bank Ltd. Although a wider geographic
distribution of the sample respondents would have been ideal, due to various constraints like
time and mobility, we had to confine ourselves to the capital city.
The accountholders of the Islamic banks were directly asked to rate the ethical issues in
corporate governance of their respective banks. A sample of the questionnaire, that was used,
has been included in the annexure section.
The information collected from the primary sources was analyzed for drawing any conclusion
to the hypotheses that were formed. For the analyses, SPSS was predominantly used. We
have attempted to divide the variables into factors and conduct factor analyses. Regression
and correlation models were used to check for any relationships between variables within and
among the factors.
2.1.2 Secondary Data Collection
The secondary sources of information were mostly journals, articles and other relevant
reports. The literature review section of the research paper was based on these secondary
sources of information. A few books were also used to provide proper guidelines to carry out
the research. A few newspapers and magazines have been used for gathering some minor
information. A proper list of the secondary sources of information has been provided in the
reference section of the research paper.
6
2.2 Sampling Method
Since the population size is too big and scattered throughout the country, it was very difficult
to reach them. So for the purpose of our report non-probabilistic convenience/accidental
sampling method, limited only to Dhaka city, has been used.
2.3 Sample Size
The population of the study comprises of all the Islamic bank customers in Bangladesh.
customers contact details, which is not possible due to reasons of confidentiality. Hence, the
study adopted a non-probability sampling method, whereby respondents were chosen on
convenience basis.
The sample size for the purpose of this research has been found out by using the following
formula:
n = (Nz2pq) / (Nd02+z2pq), where
n = sample size N = population
d0 = Precision z = reliability
p = proportion q = 1-p
now, n = (Nz2pq) / (Nd02+z2pq)
or, n = (z2pq)/ {d02+ (z2pq/N)} here, (z2pq/N) is insignificant since N is very large
therefore, n = (z2pq) / d02
Here, the value of p is considered to be 0.5 for maximum level of variance. This implies
that the value of q is also 0.5. The level of confidence for this research settled at 95% and
the precision at 5%.
Therefore, the application of formula will be thus
z = 1.96
d0 = 0.05
p = 0.5
q = 0.5
Calculation of sample size

n = (z2pq) / d02
n = (1.962*0.5*0.5)/0.052
= 384.16
385
7
So, if we want to conduct a survey at 5% precision level we would have to interview 385
people. But due to various constraints such as, time, money, accessibility, we could not
survey 385 people. We surveyed 80 account holders of Islamic banks, which gave us a
precision level of 11% in the following way-
z = 1.96
d0 = 0.11
p = 0.5
q = 0.5
Calculation of sample size

n = (z2pq) / d02
n = (1.962*0.5*0.5)/0.112 = 79.37 80
2.4 Sample Frame
The sample frame of the study comprises of all the Islamic bank customers in Bangladesh.
customers contact details, which is not possible due to reasons of confidentiality.
2.5 Questionnaire Development
The survey instrument for collecting the data was a questionnaire including closed-end
questions. The questionnaire consisted of 3 sections.
Part A sought information about the respondents identification (name, contact number, e-
mail address, name of respondents bank).
Part B was designed to know about respondents perception towards ethical issues in
corporate governance of Islamic Banks. In this section respondents were asked to indicate
their level of agreement on a 5 point likert-type scale ranging from 1 to 5 (with 1 meaning
strongly agree and 5 meaning strongly disagree). There were statements on 3 major areas of
corporate governance. Firstly, respondents were given statements about the corporate
governance structure of their bank and asked to indicate their level of agreement on a 5 point
likert-type scale ranging from 1 to 5 (with 1 meaning strongly agree and 5 meaning strongly
disagree). Secondly, respondents were given statements about the compliance to Shariah
rules by their bank and asked to indicate their level of agreement on a 5 point likert-type scale
ranging from 1 to 5 (with 1 meaning strongly agree and 5 meaning strongly disagree).
Thirdly, respondents were given statements about the level of ethical disclosure by their bank
and asked to indicate their level of agreement on a 5 point likert-type scale ranging from 1 to
5 (with 1 meaning strongly agree and 5 meaning strongly disagree). Finally, the respondents
were given one statement on the overall ethics in corporate governance of the respondents
bank and asked to indicate their level of agreement on a 5 point likert-type scale ranging from
1 to 5 (with 1 meaning strongly agree and 5 meaning strongly disagree).
8
Part C sought identification on respondents demographic factors: age, gender, level of
monthly income, and level of education, formal Islamic education background and length of
relationship with current bank. Both the co-ordination schema and the questionnaire have
been included in the appendix section.
2.6 Validity
A measure is valid if it measures what it is supposed to measure. In case of direct measure the
validity is self-evident and in case of indirect measures it is only approximate, e.g., indexes
and scales. In fact, there is no way to guarantee that an indirect measure is valid for
measuring a concept.
We have used face validity to test the validity of the variables of this research. Face Validity
implies that the items chosen to measure a variable are logically related to it. From the
literature reviews, we have logically determined the items to measure the variable.
2.7 Reliability of Data
Cronbach's alpha is a measure of internal consistency that is, how closely related a set of
items is as a group. A "high" value of alpha is often used (along with substantive arguments
and possibly other statistical measures) as evidence that the items measure an underlying (or
latent) construct. However, a high alpha does not imply that the measure is one-dimensional.
If, in addition to measuring internal consistency, you wish to provide evidence that the scale
in question is one dimensional, additional analyses can be performed. Exploratory factor
analysis is one method of checking dimensionality. Technically speaking, Cronbach's alpha is
not a statistical test - it is a coefficient of reliability (or consistency).
The result for our analysis is shown below:
Table 1: Reliability Statistics (Cronbachs Alpha)
Reliability Statistics (using Alpha technique)

Cronbach's Alpha N of Items
.903 46
Table 2: Reliability Statistics (Cronbachs Alpha and Split-half Technique)
Reliability Statistics
Value .884
Part 1
N of Items 23a
Cronbach's Alpha Value .773
Part 2
N of Items 23b
Total N of Items 46
Correlation Between Forms .706
Spearman-Brown Equal Length .828
Coefficient Unequal Length .828
Guttman Split-Half Coefficient .817
9
a. The items are: Compostion of Board, Qualified Board, Accountable board, Proper
Honorarium, SSB awareness, SSB composition, SSB expertise, SSB proper selection, SSB
responsibility, SSB independence, SSB discloses, SSB members in multiple banks, Top
management training, Top management shariah compliance, Top management ethics
encouragement, Islamic principles, Shariah knowledge, No interest paid, No interest received,
No speculative activities, No investment in haram products, No haram services, Profit free
loans provided.
b. The items are: Zaqaah paid, Risk financing, BB regulation, Govt regulation, IFSB
awareness, AAOIFI awareness, Credit risk disclosure, Recognizing Profit or Loss,
Compensating balance disclosure, misleading information never, mistakenly misleading
information, Price manipulation, Never withholds information, Effective complaints handling,
Undisclosed profits, Safeguard, Obligation, transparency, socially responsible, AGM
invitation, Newspaper checking, Bank's website checking, mails/e-mails checking.
A Cronbachs Alpha of 0.70 and above is considered to be reliable. Our Cronbachs Alpha
(Alpha Coefficient) for the 46 items is 0.904, suggesting that the items have acceptable
internal consistency among them.
Split half reliability is obtained by taking, at random, half of the variables in the scale,
averaging them into a single variable and then averaging the remaining half, and correlating
the two composite variables. The expected value for the random split-half reliability is alpha.
It must be noted that split-half reliability estimate is contingent upon how the items in the
test/scale are arranged. Reordering of the items and/or regrouping of items in the test/scale
can result in different reliability estimates using the split-half method. As we can see, the
alpha values for the two halves are .884 and .773 which means the data is reliable (as
mentioned before alpha value should be more than 0.7). Also, the different correlation co-
efficients suggest that the two halves are positively correlated and significantly correlated.
10
3.0 Literature Review
3.1 Corporate Governance in Islamic Banks
Effective corporate governance in Islamic banks as well as the firms that use bank funds is
one of the most important pillars of efficient functioning of such institutions. Unfortunately,
however, corporate governance is considered to be generally weak in the corporations of
most developing countries (Chapra and Ahmed, 2002).This is because all the institutions that
play a crucial role in disciplining markets and ensuring efficiency and integrity are not well-
developed in these countries. Information asymmetries are more severe, market participants
less experienced, and regulations, even if they exist, do not get enforced effectively and
impartially because of political corruption and the general weakness of judicial systems.
Disclosures are also not adequate and accounting practices are not well developed.
Consequently, these corporations suffer from inefficiencies and inequities that adversely
affect all stakeholders (Febianto, 2010).
In parallel with the growth of the Islamic finance sector in Bangladesh and worldwide and the
complexity of duty and responsibility of the Islamic banks towards different stakeholders, it
is strongly indicated that there must be a sound and proper corporate governance system
(Ahmed and Khatun, 2013). The good corporate governance system enhances and
strengthens the function of the Shariah board and its related institution for the purpose of
Shariah compliance. Shariah governance is a unique kind of governance in financial
architecture as it is concerned with the religious aspects of the overall activities of Islamic
Banks. The existing standard setting agencies such as the Organisation of Economic
Cooperation and Development (OECD), the International Organisation and Securities
Commission (IOSCO) and the Basel Committee on Banking Supervision (BCBS) have issued
numerous guidelines on governance and risk management for financial institutions. The
OECD has issued Guidelines on Corporate Governance, the IOSCO on capital market and the
BCBS on Basel Committee I, II and III. Nevertheless these standards and guidelines failed to
address specific ethical issues of Islamic finance (Dusuki and Abdullah, 2007). However it is
not only sufficient to have a good corporate governance structure in place but it is imperative
to communicate the actual business functioning of the bank to all its stakeholders, including
the customers (Hassan and Chachi, 2008).
3.2 Customers Attitude towards Islamic Banks
Although no literature is available on customers perception of corporate governance of

Islamic banks, a significant amount of literature on customers attitudes towards Islamic
Banks, especially concerning selection criteria (or patronage) and customer satisfaction, is
already in place. Various studies point that religion (Islam) as the main reason for choosing
Islamic banks, which has been grounded under the principles of the Quran and the Hadith.
Surveying 206 bank customers in Jordan, Naser, Jamal and Al-Khatib (1999) found that 70%
of the respondents identified religion as the reason for choosing Islamic banking. Metawa and
Almossawi (2001) found Shari`ah-based principles as the single most important factor for
choosing Islamic banks. In Gerrard and Cunninghams (1997) study, 25% of the respondents
11
pointed religion as the first factor to choose an Islamic bank. A study by Khan, Hassan and
Shahid (2007) on 100 customers of Islamic banks in Bangladesh found out that religious
principles is the key bank selection criterion of the Islamic bank customers, while customers
demography plays some role in determining which selection criteria matter more than others
do. Corporate Social Responsibility (CSR) and ethical investment have been considered as
premier factors important for choosing an Islamic bank. Ahmad and Haron (2002) affirmed
that factors like banks name and image, confidentiality, friends and family influences and
provision of quality services are equally important for customers when making decision on
their choice of bank. However, studies in Malaysia (Dusuki and Abdullah, 2007), UAE
(Kuehn and Bley, 2004), Kuwait (Owen and Othman, 2001) found non-religious factors like
efficiency, cost-benefit etc. in conjunction with religion as the influential factors behind
choosing an Islamic bank. Interestingly, one of the earliest studies of behavior of Islamic
bank customers by Erol and El-Bdour (1989) in Jordan concluded that factors such as a fast
and efficient service, the banks reputation and image, and confidentiality were the primary
bank criteria for the choice of bank, whether Islamic or conventional. This implied that
religious motivation in bank selection did not appear very important.
12
4.0 Data Analysis and Findings
We have conducted an array of analysis with the findings of the questionnaire based survey.
With the analysis, we have attempted to draw conclusion to the hypotheses we had formed.
4.1 Parameter 1- Corporate Governance Structure and Competence
The first parameter for this research is Corporate Governance Structure and Competence
where we intended to find out if the customers are aware of the composition and competence
of board of directors and Shariah supervisory Board. We also intended to find out if the top
management has enough training to maintain Shariah compliance and if it is ethical in the
decision making process.
This parameter consists of 3 complex variables which are further divided into 15 simple
variables.
4.1.1 Categorical Response Index
Index for the response of the following statements is-
1 2 3 4 5
Neither agree Strongly
Strongly agree Agree Disagree
nor disagree disagree
We have done frequency analysis for every simple variable in SPSS and found out the means
of the responses for these simple variables. Using these means we have further generated the
categorical response index. The frequency analysis for each of the simple variables under
parameter 1 is given below-
Table 3: Frequency of Responses for Parameter 1
Neither
Strongly Agree Strongly
Simple Variables Agree Disagree Total
Agree nor Disagree
Disagree
Composition of the
11 18 15 14 22 80
BOD
Qualification of the
23 31 23 2 1 80
BOD
Accountability of BOD 19 26 27 5 1 78
Honorarium
14 23 35 5 1 78
of BOD
Awareness about SSB 27 30 7 9 7 80
Composition of SSB 8 17 16 18 21 80
Qualification 16 27 22 14 1 80
13
(Competence) of SSB
Acceptable Fit and
19 14 33 2 1 79
Proper Criteria
Responsibility of SSB 22 40 15 3 0 80
Independence of SSB 17 21 25 14 3 80
Disclosure by SSB 13 24 32 9 2 80
Confidentiality of SSB 8 22 44 4 2 80
Training of top
management on Shariah 14 22 31 1 1 80
rules
Responsible Decision-
10 29 39 2 0 80
making
Enforcement of Ethics
12 44 23 1 0 80
among employees
Under our parameter 1, we have identified 3 complex variables and a total of 15 simple
variables. Among these only 1 variable, Responsibility of SSB has a high mean rating (1.99);
there are 12 variables that have a moderately high mean rating (2-3) and among these 3 are
inclined towards neutral. The mean ratings of the rest 2 simple variables are moderately low,
between 3 and 3.5.
Table 4: One Sample t-test for Categorical Response Index
One-Sample Statistics
Std. Std. Error
N Mean Interpretation
Deviation Mean
Composition of the Between Neutral and
BOD 80 3.23 1.423 .159
Disagree
Qualification of the Between Agree and
BOD 80 2.09 .889 .099
Neutral
Accountability of Between Agree and
BOD 78 2.27 .949 .107
Neutral
Remuneration of BOD 78 Between Agree and

2.44 .906 .103
Neutral
Awareness about SSB 80 Between Agree and
2.24 1.275 .143
Neutral
Composition of SSB Between Neutral and
80 3.34 1.340 .150
Disagree
Qualification Between Agree and
(Competence) of SSB 80 2.46 1.043 .117
Neutral
14
Acceptable Fit and Between Agree and
Proper Criteria 79 2.27 .902 .101
Neutral
Between Strongly Agree
Responsibility of SSB 80 1.99 .787 .088 and Agree inclined towards
Agree
Independence of SSB 80 Between Agree and
2.56 1.123 .126
Neutral
Disclosure by SSB Between Agree and
80 2.54 .980 .110
Neutral
Confidentiality of SSB 80 Between Agree and
2.63 .832 .093
Neutral
Knowledge of Shariah Between Agree and
rules 79 2.28 .816 .092
Neutral
Responsible Decision- Between Agree and
making 80 2.41 .741 .083
Neutral
Enforcement of Ethics Between Agree and
among employees 80 2.16 .683 .076
Neutral
Though the customers disagree that they are aware of the composition of the board of
directors of the bank, they responded positively to the statements that the members of the
board of directors are competent for their job, the Board of directors is accountable and their
honorarium is in line with the company policy.
Customers are aware of the Shariah Supervisory Board of the bank, but they are not aware of
the composition of it. Still they think that that the SSB members are qualified and responsible
enough. Customers are quite indifferent to the aspects of independence and accountability of
the SSB.
Customers agreed that the top management has appropriate training in Shariah rules, it takes
part in ethical decision making in line with Shariah compliance and it also ensures ethical
behavior among employees of the bank.
Detail interpretation of t-test for each simple variable under parameter 1 is given in the
following table-
Table 5: t-test Interpretation
Statement Interpretation
1. I am aware of the composition of the board Customers replied fairly neutrally
of directors of my bank They agree that they are
indifferent/unaware of the composition of
the board of directors of their bank
15
2. The members of the board of directors of Customers replied positively
my bank are sufficiently qualified to run They agree that the members of the board of
the bank directors are qualified
3. The members of the board of directors of Customers replied fairly positively
my bank are accountable to all the They fairly agreed that the board of
stakeholders of the bank directors are accountable
4. The honorarium of the board of directors is Customers replied fairly positively
in line with company policy They fairly agreed that the honorarium is in
line with the company policy
5. I am aware of the presence of a Shariah Customers replied fairly positively
Supervisory Board in my bank They fairly agreed that they are aware of the
presence of a Shariah supervisory board
6. I am aware of the composition of the Customers replied fairly Negatively
Shariah Supervisory Board of my bank They fairly disagreed that they know the
composition of the Shariah supervisory
board of the bank
7. The members of the Shariah Supervisory Customers replied fairly positively
Board are experts in the field of Islamic They fairly agreed that The members of the
finance Shariah Supervisory Board are experts in
the field of Islamic finance
8. The members of the Shariah Supervisory Customers replied fairly positively
Board are selected on the proper criteria They fairly agreed that The members of the
determined by Bangladesh bank Shariah Supervisory Board are selected on
the proper criteria determined by
Bangladesh bank
9. The Shariah Supervisory Board is Customers replied positively
responsible for ensuring Shariah They agreed that The Shariah Supervisory
compliance of the bank Board is responsible for ensuring Shariah
compliance of the bank
10. The Shariah Supervisory Board is an Customers replied neutrally
independent body, not influenced by bank They are indifferent to the statement that
managers The Shariah Supervisory Board is an
independent body, not influenced by bank
managers
11. The Shariah Supervisory Board gives a Customers replied neutrally
truthful assessment and disclosure of the They are indifferent to the statement that
Shariah compliance of the bank The Shariah Supervisory Board gives a
truthful assessment and disclosure of the
Shariah compliance of the bank
12. The members of the Shariah Supervisory Customers replied neutrally
Board of my bank do not sit on the Shariah They are indifferent to the statement that
16
Supervisory Board of another bank The members of the Shariah Supervisory
Board of my bank do not sit on the Shariah
Supervisory Board of another bank
13. The top management has appropriate Customers replied fairly positively
training in Shariah rules They fairly agreed that The top
management has appropriate training in
Shariah rules
14. The top management take part in ethical Customers replied fairly positively
decision making in line with Shariah They fairly agreed that The top
compliance management take part in ethical decision
making in line with Shariah compliance
15. The top management ensures ethical Customers replied fairly positively
behavior among employees of the bank They fairly agreed that The top
management ensures ethical behavior
among employees of the bank
4.1.2 Means of Complex Variables and Parameter 1
This section of the research displays the means of complex variables and parameters. The
complex variables are calculated through an average of the consisting simple variables and
the parameter means are calculated through an average of the consisting complex variables.
Table 6: Means of Complex Variables and Parameter 1
Complex Variables Mean Parameter Mean

Board of Directors
2.5063
(BOD) Corporate
Shariah Supervisory Governance
Board 2.5023 2.4310
Structure and
(SSB) Competence
Top Management 2.2845
4.1.3 Hypotheses Testing for Parameter 1
Under parameter 1 we have three hypotheses. These hypotheses are tested using one sample
t-test in SPSS at 95% confidence level.
17
Hypothesis 1
H0: =3, Majority of the customers are aware of the corporate governance structure and
competence of the Board of Directors.
HA: >3 Majority of the customers are not aware of the corporate governance structure and
competence of the Board of Directors.
Table 7: SPSS Findings
N Mean Std. Std. Error
Deviation Mean
Board of
80 2.5125 .80239 .08971
Directors
One-Sample Test
Test Value = 3
t df Sig. (2- Mean 95% Confidence Interval of
tailed) Difference the Difference
Lower Upper
Board of
-5.434 79 .000 -.48750 -.6661 -.3089
Directors
Analysis:
From t-table, t0.05 (at 79 degrees of freedom) = 1.6644. The decision rule to determine if we
can reject the null hypothesis or not is: if the one-tailed critical t value is less than the
observed t AND the means are in the right order, then we can reject H0. In this example, the
critical t is 1.6644 (from the table of critical t values) and the observed t is -5.434, so we fail
to reject H0.
In other words, since tcalc< t0.05, thus the null hypothesis is not rejected.
That is, there is insufficient evidence to conclude that the majority of the customers are not
aware of the corporate governance structure and competence of the Board of Directors.
Hypothesis 2
competence of the Shariah Supervisory Board.
HA:>3, Majority of the customers are not aware of the corporate governance structure and
competence of the Shariah Supervisory Board.
18
Deviation Mean
Shariah
Supervisory 80 2.5022 .67157 .07508
Board
One-Sample Test
Test Value = 3
Lower Upper
Shariah
Supervisory -6.629 79 .000 -.49777 -.6472 -.3483
Board
Analysis:
critical t is 1.6644 (from the table of critical t values) and the observed t -6.629, so we fail to
reject H0.
In other words, since tcalc < t0.05, thus the null hypothesis is not rejected.
That is, there is insufficient evidence to conclude that majority of the customers are not aware
of the corporate governance structure and competence of the Shariah Supervisory Board.
Hypothesis 3
competence of the Top Management.
HA:>3, Majority of the customers are not aware of the corporate governance structure and
competence of the Top Management.
19
Deviation Mean
Top
79 2.2954 .56485 .06355
Management
One-Sample Test
Test Value = 3
Lower Upper
Top
-11.088 78 .000 -.70463 -.8312 -.5781
Management
Analysis:
critical t is 1.6646 (from the table of critical t values) and the observed t is -11.088, so we
fail to reject H0.
That is, there is insufficient evidence to conclude that majority of the customers are not aware
of the corporate governance structure and competence of the the Top Management.
4.2 Parameter 2- Compliance to Shariah Rules
The second parameter for this research is compliance to Shariah rules where we intended to
find out if the customers are aware of the Shariah rules. We also intended to find out if the
customers know whether their bank follows Shariah rules while conducting business. The
questionnaire also sought customers perception about the regulatory bodies, such as-
Bangladesh Bank, Government, IFSB, and AAOIFI.
variables.
20
1 2 3 4 5
Neither
Strongly Agree Strongly
Simple Variables Agree Disagree Total
Agree nor Disagree
Disagree
Islamic principles 45 22 9 3 1 80
Shariah rules 21 36 13 6 4 80
Payment of interest 57 14 2 3 4 80
Receipt of interest 53 14 4 4 4 79
Involvement in
35 25 18 2 0 80
speculative activities
Investment in haram
42 24 10 2 2 80
products
Investment in haram
45 28 4 0 3 80
service
Profit free loans 31 11 18 12 8 80
payment from income
44 20 12 3 1 80
and wealth
Entitling to return 41 20 14 3 2 80
Bangladesh Bank 17 37 24 1 0 79
Government 18 24 34 4 0 80
IFSB 9 6 22 15 28 80
AAOIFI 5 3 20 11 40 79
variables. Among these 8 variables, have a high mean rating (1-2); there are 4 variables that
have a moderately high mean rating (2-3) and among these all are inclined towards Agree.
The mean ratings of the rest 2 simple variables, I know the functions of Islamic Financial
Services Board (IFSB), I know the functions of Accounting and Auditing Organization for
Islamic Financial Institutions (AAOIFI) are low, more than 3.5 and inclined towards
Disagree.
21
Std. Std. Error
Deviation Mean
Islamic principles 80 1.66 .913 .102 and Agree inclined
towards Agree
Between Agree and
Shariah rules 80 2.20 1.072 .120
Neutral
Payment of interest 79 1.54 1.072 .121
and Agree
Receipt of interest 79 1.63 1.123 .126 and Agree inclined
towards Agree
Involvement in
80 1.84 .863 .097 and Agree inclined
speculative activities
towards Agree
Investment in haram
products
towards Agree
Investment in haram
service
towards Agree
Between Agree and
Profit free loans 80 2.44 1.395 .156
Neutral
payment from
income and wealth
towards Agree
Entitling to return 80 1.81 1.020 .114 and Agree inclined
towards Agree
Between Agree and
Bangladesh Bank 79 2.11 .751 .084 Neutral inclined towards
Agree
Between Agree and
Government 80 2.30 .877 .098
Neutral
Between Neutral and
IFSB 80 3.59 1.338 .150
Disagree
Between Neutral and
AAOIFI 79 3.99 1.225 .138 Disagree inclined towards
Disagree
22
Customers strongly agreed that their bank follows all the Islamic principles in their
operations. They also responded positively to the statement that they know about the Shariah
rules. Customers strongly agreed that their bank follow the Shariah rules, such as- no
payment and receipt of interest, involvement in speculative activities, haram service or
product, payment of profit-free loans and zakaah.
Customers replied positively to the statements that Bangladesh Bank and Government play an
important role in regulation of Islamic banks in Bangladesh. But customers disagreed that
they know the functions of Islamic Financial Services Board (IFSB) and Accounting and
Auditing Organization for Islamic Financial Institutions (AAOIFI) which are the two
regulatory authorities of Islamic financing.
Detail interpretation of t-test for each simple variable under parameter 1 is given in the
following table-
1. My bank follows all the major principles Customers replied positively
in Islamic banking They agreed that The bank follows all the
major principles in Islamic banking
2. I know what the Shariah rules are Customers replied fairly positively
They fairly agreed that they know what the
Shariah rules are
3. My bank does not pay interest Customers replied positively
They agreed that The bank does not pay
interest
4. My bank does not receive interest Customers replied positively
They agreed that The bank does not receive
interest
5. My bank is not involved in any speculative Customers replied positively
activities They agreed that The bank is not involved
in any speculative activities
6. My bank does not invest in any venture Customers replied positively
producing haram products They agreed that The bank does not invest
in any venture producing haram products
7. My bank does not invest in any haram Customers replied positively
services They agreed that The bank does not invest
in any venture producing haram services
8. My bank gives profit free loans Customers replied fairly positively
They fairly agreed that the bank gives profit
free loans
9. My bank pays the obligatory payment of Customers replied positively
23
income and wealth (zaqaah) They agreed that The bank pays the
obligatory payment of income and wealth
(zaqaah)
10. My bank has entitled me to a return only Customers replied positively
when you accepted the business risk of They agreed that The bank has entitled me
your financing to a return only when you accepted the
business risk of your financing
11. Bangladesh Bank plays an important role Customers replied positively
in regulation of Islamic banks in They agreed that Bangladesh Bank plays an
Bangladesh important role in regulation of Islamic
banks in Bangladesh
12. Government plays an important role in Customers replied fairly positively
regulation of Islamic banks in Bangladesh They fairly agreed that the Government
plays an important role in regulation of
Islamic banks in Bangladesh
13. I know the functions of Islamic Financial Customers replied negatively
Services Board (IFSB) They disagreed that they know the functions
of Islamic Financial Services Board (IFSB)
14. I know the functions of Accounting and Customers replied negatively
Auditing Organization for Islamic They disagreed that they know the functions
Financial Institutions (AAOIFI) of Accounting and Auditing Organization
for Islamic Financial Institutions (AAOIFI)
4.2.2 Means of Complex Variables and Parameter 2
Perceived level of
compliance by the 1.8147
Islamic banks Compliance to
2.4058
Influence of Shariah rules
regulatory bodies on 2.9968
the Islamic banks
24
Parameter 2: Compliance of Islamic banks to Shariah rules
Under parameter 2 we have two hypotheses. These hypotheses are tested using one sample t-
test in SPSS at 95% confidence level.
Hypothesis 4
H0: =3, Majority of the customers think that their respective banks are compliant to Shariah
rules.
HA:>3, Majority of the customers do not think that their respective banks are compliant to
Shariah rules.

Deviation Mean
compliance
to Shariah 80 1.8171 .68920 .07705
rules
One-Sample Test
Test Value = 3
Lower Upper
compliance
to Shariah -15.352 79 .000 -1.18292 -1.3363 -1.0295
rules
Analysis:
fail to reject H0.
That is, there is insufficient evidence to conclude that the majority of the customers do not
think that their respective banks are compliant to Shariah rules.
25
Hypothesis 5
H0: =3. Majority of the customers think that regulatory bodies have an influence on the
compliance by their respective banks.
HA:>3, Majority of the customers do not think that regulatory bodies have an influence on
the compliance by their respective banks.

Deviation Mean
regulatory
bodies 79 3.0127 .78844 .08871
influence
One-Sample Test
Test Value = 3
Lower Upper
regulatory
bodies .143 78 .887 .01266 -.1639 .1893
influence
Analysis:
critical t is 1.6646 (from the table of critical t values) and the observed t is .143, so we fail to
reject H0.
That is, there is insufficient evidence to conclude that the majority of the customers do not
think that regulatory bodies have an influence on the compliance by their respective banks.
4.3 Parameter 3- Ethical Disclosure of Information
The third parameter for this research is ethical disclosure of information where we intended
to find out if the customers are made aware of the information that should be disclosed by the
bank. We also intended to find out if the customers know whether their bank takes adequate
26
measures to notify the customers about the disclosed information and how the customers
actually get to know about the disclosures.
variables.
1 2 3 4 5
Neither
Strongly Strongly
Simple Variables Agree Agree nor Disagree Total
Agree Disagree
Disagree
Credit risk 13 47 14 4 2 80
Investment risk 13 38 25 3 1 80
Liquidity risk 11 24 40 3 1 79
Purposefully misleading
18 26 11 0 25 80
information
Mistakenly misleading
3 21 16 12 28 80
information
Manipulating price 18 44 16 2 0 80
Withholding information 19 16 11 3 1 80
Effective complaint
17 35 21 6 1 80
handle procedure
Undisclosed profit 4 9 39 22 6 80
Appropriate safeguard 8 41 25 1 2 77
Full disclosure of
relevant material facts
17 41 21 1 0 80
before signing any
document
Transparent in conflicts 11 44 13 9 3 80
Social responsibility 43 27 7 1 1 79
Annual General Meeting 36 15 7 11 11 80
Disclosure of Price 27 25 1 12 15 80
27
sensitive information
Availability of
11 28 7 10 24 80
information on website
Updates through mail/e-
16 20 12 11 21 80
mail
variables. Among these only 1 variable, Social responsibility has a high mean rating (1.61);
there are 12 variables that have a moderately high mean rating (2-3) and among these 2 are
inclined towards neutral and 3 variables: Withholding information (My bank never misleads
clients by withholding material information), Manipulating price (My bank never
manipulates price), Full disclosure of relevant material facts before signing any document
(My bank informs clients about its obligation to make full disclosure of material facts
relevant to the proposed transaction before signing any documents) are extremely inclined
towards Agree. The mean ratings of the rest 4 simple variables are moderately low, between
3 and 3.5.
Std. Std. Error
Deviation Mean
Credit risk Between Agree and
80 2.19 .858 .096
Neutral
Investment risk Between Agree and
80 2.26 .823 .092
Neutral
Liquidity risk Between Agree and
79 2.48 .830 .093
Neutral
Misleading Between Agree and
information 80 2.85 1.576 .176 Neutral inclined towards
(purposefully) Neutral
Misleading
information Between Neutral and
80 3.51 1.312 .147
Disagree
(mistakenly)
Withholding Between Agree and

information 80 2.03 .729 .081 Neutral inclined towards
Agree
Between Agree and
Manipulating price 80 2.01 .803 .090 Neutral inclined towards
Agree
28
Effective complaint Between Agree and
handle procedure 80 2.24 .917 .103
Neutral
Undisclosed profit Between Agree and

80 3.21 .924 .103
Neutral
Appropriate safeguard 77 Between Agree and
2.32 .785 .090
Neutral
Full disclosure of
relevant material facts Between Agree and
before signing any 80 2.08 .725 .081 Neutral inclined towards
document Agree
Transparent in Between Agree and

conflicts 80 2.36 .984 .110
Neutral
Social responsibility Between Strongly Agree

79 1.61 .807 .091
and Agree
Annual General Between Agree and
Meeting 80 2.33 1.499 .168
Neutral
Disclosure of Price Between Agree and
sensitive information 80 2.54 1.542 .172
Neutral
Availability of Between Neutral and

information on website 80 3.10 1.498 .167 Disagree inclined towards
Neutral
Updates through Between Neutral and
mail/e-mail 80 3.01 1.505 .168 Disagree inclined towards
Neutral
Customers responded positively that the bank is ethical in the disclosure of information. They
agreed that their banks make them aware of the credit, investment and liquidity risks, do not
manipulate price, withhold information or provide misleading information and make full
disclosure before signing a document. They also agreed that their banks have appropriate
safeguard and effective complaint handling procedure. Customers also responded positively
to the statements that their banks are transparent in conflicts and are socially responsible.
Respondents agreed that the bank sends them the invitation to annual general meetings. But
they are neutral to the statements that they check newspaper, banks website or e-mails for
price-sensitive information of their bank.
1. My bank provides General disclosure Customers replied fairly positively
29
about credit risk in its financial statements They fairly agreed that the bank provides
General disclosure about credit risk in its
financial statements
2. My bank recognizes all expected profit or Customers replied fairly positively
losses when reasonably measurable They fairly agreed that the bank recognizes
all expected profit or losses when
reasonably measurable
3. My bank discloses the amount it is Customers replied fairly positively
obligated to deposit with others as They fairly agreed that the bank discloses
compensating balances the amount it is obligated to deposit with
others as compensating balances
4. My bank never deliberately issues Customers replied fairly neutrally
information that is potentially misleading They are indifferent to the statement that
to the stakeholders the bank never deliberately issues
information that is potentially misleading to
the stakeholders
5. My bank sometimes mistakenly issues Customers replied negatively
information that is potentially misleading They disagreed that the bank sometimes
to the stakeholders mistakenly issues information that is
potentially misleading to the stakeholders
6. My bank never manipulates price Customers replied positively
They agreed that the bank never
manipulates price
7. My bank never misleads clients by Customers replied positively
withholding material information They agreed that the bank never misleads
clients by withholding material information
8. My bank has an effective procedure to Customers replied fairly positively
handle complaints They fairly agreed that the bank has an
effective procedure to handle complaints
9. My bank makes undisclosed profit at the Customers replied negatively
expense of its clients They disagreed that the bank makes
undisclosed profit at the expense of its
clients
10. My bank has appropriate safeguard against Customers replied fairly positively
occurrences due to lack of due care They fairly agreed that the bank has
appropriate safeguard against occurrences
due to lack of due care
11. My bank informs clients about its Customers replied positively
obligation to make full disclosure of They agreed that the bank informs clients
material facts relevant to the proposed about its obligation to make full disclosure
transaction before signing any documents of material facts relevant to the proposed
30
transaction before signing any documents
12. My bank is transparent about conflicts Customers replied fairly positively
while making clear what mechanisms are They fairly agreed that the bank is
in place to manage them properly transparent about conflicts while making
clear what mechanisms are in place to
manage them properly
13. My bank conducts its business in a socially Customers replied positively
responsible manner They agreed that the bank conducts its
business in a socially responsible manner
14. My bank sends me the invitation to annual Customers replied fairly positively
general meetings They fairly agreed that the bank sends them
the invitation to annual general meetings
15. I check newspaper price-sensitive Customers replied fairly neutrally
information of my bank They are indifferent to the statement that
they check newspaper price-sensitive
information of their bank
16. I check my banks website for price- Customers replied fairly neutrally
sensitive information They are indifferent to the statement that
they check their banks website for price-
sensitive information
17. I check mails/e-mails for price-sensitive Customers replied neutrally
information of my bank They are indifferent to the statement that
they check mails/e-mails for price-sensitive
information of their bank
4.3.2 Means of Complex variables and Parameter 3
Corporate and Social

2.3970
Responsibility
Ethical Disclosure
Measures taken to 2.5703
of information
notify clients about
2.7437
the disclosed
information
31
Parameter 3: Ethical disclosure of information by Islamic banks
Under parameter 3 we have two hypotheses. These hypotheses are tested using one sample t-
test in SPSS at 95% confidence level.
Hypothesis 6
H0: =3, Majority of the customers think that their respective banks are ethical in corporate
and social reporting.
HA: >3, Majority of the customers do not think that their respective banks are ethical in
corporate and social reporting.
N Mean Std. Deviation Std. Error Mean
ethical in
corporate and 80 2.3980 .43153 .04825
social reporting
One-Sample Test
Test Value = 3
Lower Upper
ethical in -
corporate and 12.47 79 .000 -.60200 -.6980 -.5060
social reporting 8
Analysis:
fail to reject H0.
That is, there is insufficient evidence to conclude that majority of the customers do not think
that their respective banks are ethical in corporate and social reporting.
32
Hypothesis 7
H0: =3, Majority of the customers think that their respective banks take adequate measures
to notify them about disclosed information.
HA: >3, Majority of the customers do not think that their respective banks take adequate
measures to notify them about disclosed information.
Deviation Mean
Notification
about
80 2.7438 1.29384 .14466
disclosed
information
One-Sample Test
Test Value = 3
Lower Upper
Notification
about
-1.771 79 .080 -.25625 -.5442 .0317
disclosed
information
Analysis:
critical t is 1.6644 (from the table of critical t values) and the observed t is -1.771, so we fail
to reject H0.
That is, there is insufficient evidence to conclude that majority of the customers do not think
that their respective banks take adequate measures to notify them about disclosed
information.
33
4.4 Overall Perception towards Ethical Standards in Corporate Governance
We put a statement in the questionnaire which was Overall my bank is ethical in corporate
governance and told the respondents to indicate their response using the following scale:
1 2 3 4 5
We analyzed the responses and found that 86.1% of the respondents think that their banks are
ethical in corporate governance and only 3.8% of the respondents think that their banks are
unethical in corporate governance. The frequencies of their answers are given in the
following table:
Table 22: Frequency of Responses
Frequency Percent Valid Cumulative

Percent Percent
Strongly Agree 17 21.3 21.5 21.5
Agree 51 63.8 64.6 86.1
Valid Neither agree nor disagree 8 10.0 10.1 96.2
Strongly disagree 3 3.8 3.8 100.0
Total 79 98.8 100.0
Missing System 1 1.3
Total 80 100.0
Mean for overall perception towards ethical standard in corporate governance is found to be
2.00. It means that customers overall perception towards ethical standard in corporate
governance of the Islamic banks is positive.
N Mean Std. Std. Error Interpretation
Deviation Mean
Overall Perception 79 2.00 0.816 .092 Customers agreed that their
towards Ethical bank is overall ethical in
Standards corporate governance
34
4.5 Factor Analysis
Factor analysis identifies unobserved variables that explain patterns of correlations within a
set of observed variables. It is often used to identify a small number of factors that explain
most of the variance embedded in a larger number of variables. Thus, factor analysis is about
data reduction. It can also be used to generate hypotheses regarding the composition of
factors. Furthermore, factor analysis is often used to screen variables for subsequent analysis
(e.g., to identify co-linearity prior to performing a linear regression analysis). (Mooi &
Sarstedt, 2012).
Below is the factor analysis for the 46 variables we have selected for our research. The
analysis shows there are 13 are factors which influence the ethical standards in customers
minds.
Table 24: Total Variance Explained (Partial)
Compone Initial Eigenvalues Extraction Sums of Rotation Sums of

nt Squared Loadings Squared Loadings
Tota % of Cumulati Tota % of Cumulati Tota % of Cumulati
l Varianc ve % l Varianc ve % l Varianc ve %
e e e
9.94 9.94 5.12
1 21.626 21.626 21.626 21.626 11.131 11.131
8 8 0
5.49 5.49 3.71
2 11.945 33.571 11.945 33.571 8.083 19.214
5 5 8
3.70 3.70 3.47
3 8.058 41.629 8.058 41.629 7.546 26.760
7 7 1
3.17 3.17 3.45
4 6.893 48.522 6.893 48.522 7.500 34.260
1 1 0
2.60 2.60 3.08
5 5.667 54.190 5.667 54.190 6.712 40.972
7 7 8
2.05 2.05 3.08
6 4.469 58.659 4.469 58.659 6.697 47.669
6 6 1
2.02 2.02 2.34
7 4.397 63.056 4.397 63.056 5.098 52.767
2 2 5
1.74 1.74 2.26
8 3.790 66.846 3.790 66.846 4.919 57.686
3 3 3
1.47 1.47 2.21
9 3.216 70.061 3.216 70.061 4.814 62.500
9 9 4
1.18 1.18 2.11
10 2.565 72.627 2.565 72.627 4.606 67.106
0 0 9
1.11 1.11 2.10
11 2.430 75.057 2.430 75.057 4.578 71.684
8 8 6
35
1.09 1.09 1.96
12 2.386 77.443 2.386 77.443 4.281 75.965
8 8 9
1.03 1.03 1.71
13 2.254 79.697 2.254 79.697 3.732 79.697
7 7 7
14 .861 1.871 81.568
Extraction Method: Principal Component Analysis.
As shown in the partial table, the first factor can explain up to 21.626% of the variance. The
second factor can explain 11.945% of the variance, cumulating to 33.571%.
The factor variables are found from the rotated component matrix given in the appendix.
Here are the factors and the variables each of them consists.
Factor 1:
a) Payment of interest
b) Receipt of interest
c) Investment in haram products
d) Investment in haram service
e) Involvement in speculative activities
f) Profit free loans
g) Islamic principles
h) Payment from income and wealth
Factor 2:
a) Qualification of the BOD

b) Accountability of BOD
c) Honorarium of BOD
d) Acceptable Fit and Proper Criteria of SSB members
e) Enforcement of Ethics among employees
Factor 3:
a) Social responsibility
b) Independence of SSB
c) Disclosure by SSB
d) Responsibility of SSB
e) Responsible and Shariah compliant decision-making by Top management
f) Qualification (Competence) of SSB
Factor 4:
a) AAOIFI awareness
b) IFSB awareness
c) Composition of SSB
36
d) Composition of BOD
e) Shariah Knowledge
Factor 5:
a) Availability of information on website

b) Updates through mail/e-mail
c) Disclosure of Price sensitive information
d) Annual General Meeting
Factor 6:
a) Transparent in conflicts
b) Withholding information
c) Effective complaint handle procedure
Factor 7:
a) Purposefully misleading information

b) Mistakenly misleading information
Factor 8:
a) Bangladesh Bank regulation

b) Govt.s regulation
Factor 9:
a) Investment risk
b) Liquidity risk
Factor 10:
a) Credit risk
b) Full disclosure of relevant material facts before signing any document
Factor 11:
a) Appropriate safeguard
b) Manipulating price
Factor 12:
a) Awareness about SSB

b) Training of top management on Shariah rules
c) Composition of SSB
Factor 13:
a) Undisclosed profit
b) Entitling to return
37
4.6 KMO and Bartletts Test
Along with the factor analysis we have done the KMO and Bartletts test. Measured by the
Kaiser-Meyer-Olkin (KMO) statistics, sampling adequacy predicts if data are likely to factor
well, based on correlation and partial correlation. Bartlett's test of sphericity tests whether the
correlation matrix is an identity matrix, which would indicate that the factor model is
inappropriate. The KMO measures the sampling adequacy which should be greater than 0.5
for a satisfactory factor analysis to proceed. Looking at the table below, the KMO measure is
0.539. From the same table, we can see that the Bartlett's test of sphericity is significant. That
is, its associated probability is less than 0.05. In fact, it is actually 0.000. This means that the
correlation matrix is not an identity matrix.
Table 25: KMO and Bartletts Test
KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .539
Approx. Chi-Square 2556.273
Bartlett's Test of Sphericity df 1035
Sig. .000
4.7 Regression Analysis
Linear Regressions can be used to address a variety of research questions. It can tell you how
well our set of factors can explain the ethical issues in corporate governance of Islamic banks
in the eyes of its account holders.
Table 26: Model Summary (R, R Square and Adjusted R Square)
Model Summary
Model R R Square Adjusted R Std. Error of the
Square Estimate
a
1 .492 .243 .067 .753
a. Predictors: (Constant), REGR factor score 13 for analysis 1, REGR factor
score 1 for analysis 1, REGR factor score 2 for analysis 1, REGR factor
score 8 for analysis 1, REGR factor score 5 for analysis 1
Capital R is the simple correlation coefficient that tells us how strongly the multiple
independent variables are related to the dependent variable.
38
R: the value of the co-efficient of correlation is +.492 which means that theres a moderate
relationship in the customers perception towards ethical issues with the factors. Customers
overall perception move towards the changes in dependent variables associated with our
research.
R2 : is the coefficient of determination. The R2 value indicates how much of the dependant
variable in this case the overall ethical issues can be explained by the independent variables
(the factors). From the model summary R2 is 0.243 which implies that around 24.3% of the
overall ethical standards can be explained by the factors determined for the research.
Adjusted R2 : adjusted R2 gives the true dependency. As the number of variable increases,
the R value increases without showing true dependency. To mitigate the phenomenon
Adjusted R2 is used to show the true dependency. Here the model shows that the adjusted R2
is .067 which means that 6.7% of the time, the changes in dependant variable, in this case the
overall ethical standard from clients point of view can be explained by the changes in the
independent variables thus the factors.
ANOVA:
It is the analysis of variance (the deviations in the dependent variable).
There are four basic assumptions used in ANOVA.
the expected values of the errors are zero
the variances of all errors are equal to each other
the errors are independent
they are normally distributed
The ANOVA table partitions the variation in the response measurements into components
that correspond to different sources of variations. The goal in this procedure is to split the
total variation in the data into a portion due to random error and portions due to changes in
the values of the independent variable(s). The test statistic is the F value of 1.378. The p-
value for 1.379 is .199 so it is not significant at a .05 level of significance. Therefore, we fail
to reject the null hypothesis of equal population means and fail to prove that there is a
(statistically) significant difference among the population means.
Table 27: ANOVA
ANOVAa
Model Sum of Squares df Mean Square F Sig.
Regression 10.172 13 .782 1.379 .199b
1 Residual 31.771 56 .567
Total 41.943 69
a. Dependent Variable: Overall ethical standards
b. Predictors: (Constant), REGR factor score 13 for analysis 1, REGR factor score 1 for
analysis 1, REGR factor score 2 for analysis 1, REGR factor score 9 for analysis 1,
REGR factor score 4 for analysis 1, REGR factor score 3 for analysis 1, REGR factor
score 11 for analysis 1, REGR factor score 12 for analysis 1, REGR factor score 6 for
analysis 1, REGR factor score 7 for analysis 1, REGR factor score 10 for analysis 1,
REGR factor score 8 for analysis 1, REGR factor score 5 for analysis 1
39
SSR (Sum square of regression) is the sum of the square of the deviation of actual values of
dependent variable (overall) with the regression line values corresponding of the values of
independent variables.
SSE (Sum square of error/residual) is the sum of the square of the deviation of the regression
line values with the mean values of the dependent variable (overall).
These are needed to determine the F-value through mean square and degrees of freedom
which later gives us the significance of the model. We are 80% confident that our model
explained the variation of dependent variable (overall).
Coefficient:
The beta coefficient explains how strongly the factors are associated with the overall ethical
standard and the corresponding significance value show how assertive we can be about the
association.
Table 28: Coefficients
Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
(Constant) 1.973 .090 21.897 .000
REGR factor score 1
-.046 .090 -.059 -.506 .615
for analysis 1
REGR factor score 2
.199 .090 .257 2.206 .031
for analysis 1
REGR factor score 3
-.036 .090 -.047 -.404 .688
for analysis 1
REGR factor score 4
.146 .090 .189 1.623 .110
for analysis 1
REGR factor score 5
.035 .092 .045 .382 .704
for analysis 1
1 REGR factor score 6
.053 .090 .068 .583 .562
for analysis 1
REGR factor score 7
.012 .091 .016 .133 .894
for analysis 1
REGR factor score 8
.084 .091 .107 .923 .360
for analysis 1
REGR factor score 9
.005 .090 .007 .061 .952
for analysis 1
REGR factor score 10
.112 .091 .143 1.228 .225
for analysis 1
-.186 .090 -.240 -2.060 .044
for analysis 1
40
.086 .090 .111 .957 .343
for analysis 1
.125 .090 .162 1.391 .170
for analysis 1
a. Dependent Variable: Overall ethical standards
Overall ethical standard= 1.973+Bi * Factori

So the regression model is,
1.973-.046f1+.199f2-.036f3+.146f4+.035f5+.053f6+.012f7+.084f8+.005f9+.112f10-
.186f11+.086f12+.125f13
We can see from the beta coefficients in the table that some of the factors are more strongly
related than others and are more responsible in coming to our dependent variable of overall
ethical standard. An increase in the factors with negative coefficients will reduce the
dependent variable and a decrease will escalate the dependent variable. For the positive
coefficients, they will move in the same direction, i.e. an increase in the factor will increase
the overall ethical standards, and a fall in the factor will reduce the overall ethical standards.
4.8 Other Factors Related Hypothesis Testing
4.8.1 Determining Association Using Bivariate Analysis (Chi Square Test)
Age and Overall Perception towards Ethical Standards
H0: There is no association between the two variables.

HA: There is an association between the two variables.
Following is output of a Chi Square Test of Independence. We wanted to see whether age
affects the perception of overall ethical standards maintained by the Islamic banks in
Bangladesh.
Table 29: Chi-Square Test for Age and Overall Perception towards Ethical Standards
Chi-Square Tests
Value df Asymp. Sig. (2-
sided)
Pearson Chi-Square 11.930a 15 .684
Likelihood Ratio 14.574 15 .482
Linear-by-Linear Association .408 1 .523
N of Valid Cases 77
a. 19 cells (79.2%) have expected count less than 5. The minimum expected count is .04.
41
We see that our Pearson Chi Square value is 11.930. We have 15 degrees of freedom. Our
significance is 0.684.
For Chi-square (15) = 11.930, p>0.05 (our significance level is less than 0.05). Therefore, we
can say that the two variables are not associated. So, age does not affect the perception of
overall ethical standards maintained by the Islamic banks in Bangladesh.
Gender and Overall Perception towards Ethical Standards

Following is output of a Chi Square Test of Independence. We wanted to see whether gender
affects the perception of overall ethical standards maintained by the Islamic banks in
Bangladesh.
Table 30: Chi-Square Test for Gender and Overall Perception towards Ethical
Standards
Chi-Square Tests
sided)

Linear-by-Linear Association 1.220 1 .269
N of Valid Cases 79
a. 4 cells (50.0%) have expected count less than 5. The minimum expected count is 1.41.
can say that the two variables are not associated. So, gender does not affect the perception of
overall ethical standards maintained by the Islamic banks in Bangladesh.
Average Monthly Income and Overall Perception towards Ethical Standards

Following is output of a Chi Square Test of Independence. We wanted to see whether average
monthly income affects the perception of overall ethical standards maintained by the Islamic
banks in Bangladesh.
42
Table 31: Chi-Square Test for Average Monthly Income and Overall Perception
towards Ethical Standards
Chi-Square Tests
sided)
N of Valid Cases 56
can say that the two variables are not associated. So, average monthly income does not affect
the perception of overall ethical standards maintained by the Islamic banks in Bangladesh.
Level of Education and Overall Perception towards Ethical Standards

Following is output of a Chi Square Test of Independence. We wanted to see whether level of
education affects the perception of overall ethical standards maintained by the Islamic banks
in Bangladesh.
Table 32: Chi-Square Test for Level of Education and Overall Perception towards
Ethical Standards
Chi-Square Tests
sided)

N of Valid Cases 76
43
can say that the two variables are not associated. So, level of education does not affect the
perception of overall ethical standards maintained by the Islamic banks in Bangladesh.
Formal Islamic Education Background and Overall Perception towards Ethical Standards

Following is output of a Chi Square Test of Independence. We wanted to see whether formal
Islamic education background affects the perception of overall ethical standards maintained
by the Islamic banks in Bangladesh.
Table 33: Chi-Square Test for Formal Islamic Education Background and Overall
Chi-Square Tests
sided)
N of Valid Cases 77
For Chi-square (3) = 9.056, p<0.05 (our significance level is less than 0.05). Therefore, we
can say that the two variables are associated. So, formal Islamic education background affects
the perception of overall ethical standards maintained by the Islamic banks in Bangladesh.
Length of relationship with Islamic Bank and Overall Perception towards Ethical Standards

Following is output of a Chi Square Test of Independence. We wanted to see whether length
of relationship with Islamic banking affects the perception of overall ethical standards
maintained by the Islamic banks in Bangladesh.
44
Table 34: Chi-Square Test for Length of relationship with Islamic Bank and Overall
Chi-Square Tests
sided)

N of Valid Cases 75
can say that the two variables are not associated. So, length of relationship with Islamic
banking does not affect the perception of overall ethical standards maintained by the Islamic
banks in Bangladesh.
4.8.2 Determining Correlation Using Bivariate Analysis (Correlation Test)
Age and Overall Perception towards Ethical Standards
H0: The variables are correlated

HA: The variables are not correlated
Table 35: Correlation between Age and Overall Perception towards Ethical Standards
Correlations
Overall perception towards Age
ethical standards
Pearson Correlation 1 -.073
Overall ethical
Sig. (1-tailed) .263
standards
N 79 77
Pearson Correlation -.073 1
Age Sig. (1-tailed) .263
N 77 78
Pearson correlation value between the overall ethical standards and age of respondent is -.073
and p-value is 0.263 which is more than our significance level 0.05. Thus we cannot reject
the null hypothesis. So, we can conclude that the variables are correlated. The Pearsons
45
correlation value -.073 denotes the weak correlation between the variables. It implies that
change in one variable result in slight change of the other variable in the other direction.
Gender and Overall Perception towards Ethical Standards

Pearson correlation value between the overall ethical standards and gender of respondent is -
.125 and p-value is 0.136 which is more than our significance level 0.05. Thus we cannot
reject the null hypothesis. So, we can conclude that the variables are correlated. The
Pearsons correlation value -.125 denotes the weak correlation between the variables. It
implies that change in one variable result in slight change of the other variable in the other
direction.
Table 36: Correlation between Gender and Overall Perception towards Ethical
Standards
Correlations
Overall ethical Gender
standards
Overall ethical standards Sig. (1-tailed) .136
N 79 79
Gender Sig. (1-tailed) .136
N 79 80
Average Monthly Income and Overall Perception towards Ethical Standards

Pearson correlation value between the overall ethical standards and average monthly income
of respondent is -.246 and p-value is 0.034 which is less than our significance level 0.05.
Thus we can reject the null hypothesis. So, we can conclude that the variables are not
correlated. The Pearsons correlation value -.246 denotes the weak correlation between the
variables. It implies that change in one variable result in slight change of the other variable in
the other direction.
46
Table 37: Correlation between Average Monthly Income and Overall Perception
towards Ethical Standards
Correlations
Overall ethical Average
standards Monthly Income
Pearson Correlation 1 -.246*

N 79 56
*
Average Monthly Income Sig. (1-tailed) .034
N 56 57
*. Correlation is significant at the 0.05 level (1-tailed).
Level of Education and Overall Perception towards Ethical Standards

Pearson correlation value between the overall ethical standards and level of education of
respondent is -.169 and p-value is 0.072 which is more than our significance level 0.05. Thus
we cannot reject the null hypothesis. So, we can conclude that the variables are correlated.
The Pearsons correlation value -.169 denotes the weak correlation between the variables. It
implies that change in one variable result in slight change of the other variable in the other
direction.
Table 38: Correlation between Level of Education and Overall Perception towards
Ethical Standards
Correlations
Overall ethical Level of
standards Education
N 79 76
Level of Education Sig. (1-tailed) .072
N 76 77
47
Formal Islamic Education Background and Overall Perception towards Ethical Standards

Pearson correlation value between the overall ethical standards and formal Islamic education
background of respondent is .205 and p-value is 0.037 which is less than our significance
level 0.05. Thus we can reject the null hypothesis. So, we can conclude that the variables are
not correlated. The Pearsons correlation value .205 denotes the weak correlation between the
variables. It implies that change in one variable result in slight change of the other variable in
the same direction.
Table 39: Correlation between Formal Islamic Education Background and Overall
Correlations
Overall ethical Formal Islamic
standards Education
Background
Pearson Correlation 1 .205*
N 79 77
*
Pearson Correlation .205 1
Formal Islamic Education
Background
N 77 78
Length of relationship with Islamic Bank and Overall Perception towards Ethical Standards

Pearson correlation value between the overall ethical standards and length of relationship
with Islamic bank of respondent is -.215 and p-value is 0.032 which is less than our
significance level 0.05. Thus we can reject the null hypothesis. So, we can conclude that the
variables are not correlated. The Pearsons correlation value -.215 denotes the weak
correlation between the variables. It implies that change in one variable result in slight
change of the other variable in the other direction.
48
Table 40: Correlation between Length of relationship with Islamic Bank and Overall
Correlations
Overall ethical Length of
standards relationship with
Islamic Bank
Pearson Correlation 1 -.215*
N 79 75
Pearson Correlation -.215* 1
Length of relationship with
Islamic Bank
N 75 76
49
5.0 Conclusion
After conducting surveys of 80 account holders in different Islamic Banks, based on the
perception of the respondents it is possible to infer that the customers are aware of the
corporate governance structure and competence of the Shariah Supervisory Board. Our
research also concludes that the people are aware of the competence of the board of directors
and top management. On matters regarding the structure of governance, management and
other criterions parameters were set, under these parameters hypotheses were established to
reach a conclusion. Customers being aware of these criterions were set in the null hypotheses
and the opposite in the alternate. The results of all these hypotheses were coherent i.e. the
customers are aware.
The awareness of customers regarding ethical issues was not subject to change on the basis of
some variables. The association between these variables was measured by Bivariate Analysis
(Chi Square). Variables like gender, age, level of education, formal Islamic education
background etc. was not responsible for a customers overall perception towards ethical
standards. For understanding the correlation between the above mentioned variables and
perception Bivariate Analysis (Correlation) was done. There were no instances where the
variables and perception moved together strongly in the same direction, in most cases the
relationship was weak.
In conclusion, the objective of this research was accomplished through rigorous data
collection and intricate methods of data analysis. As the nature of this research was
exploratory the need for providing recommendations to the Islamic Banks for influencing the
customers perception did not come into question. The verdict that can be reached through
the data collected and analyzed for the purpose of this research is that, the customers are
aware of the corporate governance structure.
50
NOTES
1. Shariah: The basic principle in the Shariah (Islamic Canon Law) is that exploitative
contracts based on interest or usury and speculation should be unenforceable. These laws are
derived from three sources: the Quran, the Hadith, and the Sunnah.
2. Mudaraba: The term refers to a form of business contract in which one party brings capital
and the other personal effort. The proportionate share in profit is determined by mutual
agreement. But the loss, if any, is borne only by the owner of the capital, in which case the
entrepreneur gets nothing for his labor.
3. Riba: Literally, an increase or addition. Technically it denotes in a loan transaction any
increase or advantage obtained by the lender as a condition of the loan. Synonymous to rate
of interest in the conventional banking mechanism.
4. Fiqh al-Muamalat: Basic Shariah Principles
5. Wadiah (safekeeping): A bank is deemed as a keeper and trustee of funds. A person
deposits funds in the bank and the bank guarantees refund of the entire amount of the deposit,
or any part of the outstanding amount, when the depositor demands it.
6. Musharaka: A partnership between two parties, both of whom provide capital towards the
financing of a project.
7. Murabaha: It is a contract of sale in which the seller declares his cost and the profit.
8. Ijara5h: This is a contract involving hiring or leasing through which the services of a
person or a legal entity or organization is rented out or leased
9. Halaal: In Arabic-speaking countries, the term is used to describe anything permissible
under Islamic law
10. Haraam: That which is forbidden
11. Adab: Courtesy
12. Khuluq: Good manners
13. Zakah: Charity
14. Gharar: Speculative Activities
51
APPENDIX 1: OPERATIONALIZATION OF VARIABLES
The Coordination Schema of the Parameters, Complex Variables and Simple Variables are
given below:
Table 41: Coordination Schema
Complex Question
Parameter Simple Variables Values
Variables Number
Composition of the BOD Likert Scale 1
Board of Directors Qualification of the BOD Likert Scale 2
(BOD) Accountability of BOD Likert Scale 3
Remuneration of BOD Likert Scale 4
Awareness about SSB Likert Scale 5
Composition of SSB Likert Scale 6
Qualification (Competence)
Likert Scale 7
of SSB
Corporate Shariah
Acceptable Fit and Proper
Governance Supervisory Board Likert Scale 8
Criteria
Structure (SSB)
Responsibility of SSB Likert Scale 9
Independence of SSB Likert Scale 10
Disclosure by SSB Likert Scale 11
Confidentiality of SSB Likert Scale 12
Knowledge of Shariah rules Likert Scale 13
Responsible Decision-
Likert Scale 14
Top Management making
Enforcement of Ethics
Likert Scale 15
among employees
Islamic principles Likert Scale 16
Shariah rules Likert Scale 17
Payment of interest Likert Scale 18
Receipt of interest Likert Scale 19
Involvement in speculative
Likert Scale 20
activities
Perceived level of
Investment in haram
compliance by the Likert Scale 21
products
banks
Investment in haram
Compliance to Likert Scale 22
service
Shariah Rules
Profit free loans Likert Scale 23
payment from income and
Likert Scale 24
wealth
Entitling to return Likert Scale 25
Influence of Bangladesh Bank Likert Scale 26
regulatory bodies Government Likert Scale 27
on the compliance IFSB Likert Scale 28
of the banks
AAOIFI Likert Scale 29
52
Parameter Complex Variables Simple Variables Values Question
Number
Credit risk Likert Scale 30
Investment risk Likert Scale 31
Liquidity risk Likert Scale 32
Misleading Likert Scale 33
information
(purposefully)
Misleading Likert Scale 34
information
(mistakenly)
Withholding Likert Scale 36
information
Corporate and Social Manipulating price Likert Scale 35
reporting Effective complaint Likert Scale 37
handle procedure
Undisclosed profit Likert Scale 38
Ethical Appropriate
Likert Scale 39
Disclosure safeguard
Of Information Full disclosure of
relevant material
Likert Scale 40
facts before signing
any document
Transparent in
Likert Scale 41
conflicts
Social
Likert Scale 42
responsibility
Annual General
Likert Scale 43
Meeting
Disclosure of Price
Measures taken to notify sensitive Likert Scale 44
clients about the disclosed information
information Availability of
information on Likert Scale 45
website
Updates through
Likert Scale 46
mail/e-mail
53
APPENDIX 2: SURVEY QUESTIONNAIRE
CUSTOMERS PERCEPTION OF ETHICAL ISSUES IN CORPORATE
GOVERNANCE OF ISLAMIC BANKS IN BANGLADESH
This is a survey on your perception towards the ethical issues in corporate governance of
Islamic banks in Bangladesh. The survey is conducted by a group of third year BBA students
from the Institute of Business Administration, University of Dhaka, as a requirement for the
completion of the course: Research Methodology. The responses will be used only for
academic purposes and confidentiality of information given by the respondents will be
maintained strictly. We appreciate your cooperation.
Part A: Identification Data
Respondents name:.....
Contact no.:E-mail address:.
Name of respondents bank:..Date of interview:..
Part B: Perception towards ethical issues in corporate governance
Please read the following statements carefully and tick the respective boxes, according to
your degree of agreement. Use the following scale for your answer:
1 2 3 4 5
Statements 1 2 3 4 5
Board of Directors
1. I am aware of the composition of the board of directors of my bank
2. The members of the board of directors of my bank are sufficiently qualified to run
the bank
3. The members of the board of directors of my bank are accountable to all the
stakeholders of the bank
4. The honorarium of the board of directors is in line with company policy
Shariah Supervisory Board
5. I am aware of the presence of a Shariah Supervisory Board in my bank
6. I am aware of the composition of the Shariah Supervisory Board of my bank
7. The members of the Shariah Supervisory Board are experts in the field of Islamic
finance
8. The members of the Shariah Supervisory Board are selected on the proper criteria
determined by Bangladesh bank
9. The Shariah Supervisory Board is responsible for ensuring Shariah compliance of the
54
bank
10. The Shariah Supervisory Board is an independent body, not influenced by bank
managers
11. The Shariah Supervisory Board gives a truthful assessment and disclosure of the
Shariah compliance of the bank
12. The members of the Shariah Supervisory Board of my bank do not sit on the Shariah
Supervisory Board of another bank
Top Management
13. The top management has appropriate training in Shariah rules
14. The top management take part in ethical decision making in line with Shariah
compliance
15. The top management ensures ethical behavior among employees of the bank
Perceived level of compliance by the banks
16. My bank follows all the major principles in Islamic banking
17. I know what the Shariah rules are
18. My bank does not pay interest
19. My bank does not receive interest
20. My bank is not involved in any speculative activities
21. My bank does not invest in any venture producing haram products
22. My bank does not invest in any haram services
23. My bank gives profit free loans
24. My bank pays the obligatory payment of income and wealth (zaqaah)
25. My bank has entitled me to a return only when I accepted the business risk of my
financing
Influence of regulatory bodies on the compliance of the banks
26. Bangladesh Bank plays an important role in regulation of Islamic banks in
Bangladesh
27. Government plays an important role in regulation of Islamic banks in Bangladesh
28. I know the functions of Islamic Financial Services Board (IFSB)
29. I know the functions of Accounting and Auditing Organization for Islamic Financial
Institutions (AAOIFI)
Corporate and Social reporting
30. My bank provides General disclosure about credit risk in its financial statements
31. My bank recognizes all expected profit or losses when reasonably measurable
32. My bank discloses the amount it is obligated to deposit with others as compensating
balances
33. My bank never deliberately issues information that is potentially misleading to the
stakeholders
34. My bank sometimes mistakenly issues information that is potentially misleading to
the stakeholders
55
35. My bank never manipulates price
36. My bank never misleads clients by withholding material information
37. My bank has an effective procedure to handle complaints
38. My bank makes undisclosed profit at the expense of its clients
39. My bank has appropriate safeguard against occurrences due to lack of due care
40. My bank informs clients about its obligation to make full disclosure of material facts
relevant to the proposed transaction before signing any documents
41. My bank is transparent about conflicts while making clear what mechanisms are in
place to manage them properly
42. My bank conducts its business in a socially responsible manner
Measures taken to notify clients about the disclosed information
43. My bank sends me the invitation to annual general meetings
44. I check newspaper price-sensitive information of my bank
45. I check my banks website for price-sensitive information
46. I check mails/e-mails for price-sensitive information of my bank
Overall Ethics
47. Overall my bank is ethical in corporate governance
Part C: Demographic Information
1. Age: .. 2. Gender: Male Female
3. What is your average monthly income?
4. What is your level of education? ..........................................
5. Do you have formal Islamic Education background? Yes No
6. What is the length of your relationship with Islamic banks?

Less than 2 years 2 to less than 4 years
4 to less than 6 years 6 years and more
Thank you for your co-operation.
56
APPENDIX 3: SPSS OUTPUT
Table: Total Variance Explained

Total Variance Explained
Component Initial Eigenvalues Extraction Sums of Squared Rotation Sums of Squared

Loadings Loadings
Total % of Cumulative Total % of Cumulative Total % of Cumulative

Variance % Variance % Variance %
1 9.948 21.626 21.626 9.948 21.626 21.626 5.120 11.131 11.131

2 5.495 11.945 33.571 5.495 11.945 33.571 3.718 8.083 19.214
3 3.707 8.058 41.629 3.707 8.058 41.629 3.471 7.546 26.760
4 3.171 6.893 48.522 3.171 6.893 48.522 3.450 7.500 34.260
5 2.607 5.667 54.190 2.607 5.667 54.190 3.088 6.712 40.972
6 2.056 4.469 58.659 2.056 4.469 58.659 3.081 6.697 47.669
7 2.022 4.397 63.056 2.022 4.397 63.056 2.345 5.098 52.767
8 1.743 3.790 66.846 1.743 3.790 66.846 2.263 4.919 57.686
9 1.479 3.216 70.061 1.479 3.216 70.061 2.214 4.814 62.500
10 1.180 2.565 72.627 1.180 2.565 72.627 2.119 4.606 67.106
11 1.118 2.430 75.057 1.118 2.430 75.057 2.106 4.578 71.684
12 1.098 2.386 77.443 1.098 2.386 77.443 1.969 4.281 75.965
13 1.037 2.254 79.697 1.037 2.254 79.697 1.717 3.732 79.697
14 .861 1.871 81.568
15 .778 1.691 83.260
16 .766 1.666 84.926
17 .650 1.413 86.339
18 .597 1.298 87.637
19 .542 1.178 88.815
20 .529 1.150 89.965
21 .473 1.029 90.994
22 .426 .926 91.920
23 .410 .891 92.811
24 .350 .760 93.571
25 .332 .721 94.292
26 .306 .665 94.957
27 .282 .612 95.569
28 .245 .532 96.101
29 .215 .467 96.568
30 .211 .459 97.026
31 .175 .381 97.407
32 .163 .355 97.763
33 .152 .331 98.094
34 .131 .284 98.377
57
35 .122 .265 98.642
36 .106 .230 98.872
37 .098 .213 99.086
38 .085 .184 99.270
39 .077 .167 99.437
40 .068 .147 99.585
41 .051 .111 99.695
42 .042 .092 99.788
43 .040 .086 99.874
44 .025 .055 99.929
45 .021 .046 99.975
46 .012 .025 100.000
Table: Rotated Component Matrix

Rotated Component Matrixa
Component
1 2 3 4 5 6 7 8 9 10 11 12 13
No interest
.881 -.122 .168 .097 .058 -.001 -.055 -.107 -.005 -.035 .021 .100 -.066
paid
No interest
.876 -.108 .174 .070 .122 .051 -.103 .050 -.058 -.029 .028 .062 -.088
received
No investment
in haram .765 .169 .049 .009 .158 .150 .161 .093 -.100 .056 .037 -.005 -.070
products
No haram
.689 .050 .170 .095 .262 .107 .172 -.104 .231 -.145 -.211 -.033 .143
services
No speculative
.615 -.137 .125 -.004 .084 .339 -.145 .391 .184 .055 .035 -.041 -.138
activities
Profit free
.596 .047 -.206 .298 .124 .122 -.213 -.189 .178 .302 .010 .234 .240
loans provided
Islamic
.506 -.046 .250 .353 .031 .433 -.255 .133 .084 .102 -.034 -.148 .275
principles
Zaqaah paid .494 .082 .397 .234 -.023 .136 -.146 .186 .244 -.088 .231 -.201 .339
Qualified Board -.078 .863 -.064 .124 .143 -.017 -.008 .098 .060 .041 -.003 .090 -.063
Accountable
-.130 .695 .238 -.090 .124 -.136 .120 .080 .221 .408 .092 .023 -.106
board
SSB proper
.053 .692 .096 .201 -.106 .169 .163 -.144 .172 -.013 -.084 .397 .019
selection
Proper
.038 .599 .543 .109 .106 -.166 -.034 .196 .111 -.003 .238 -.043 .049
Honorarium
58
Top
management
.309 .496 .004 .121 -.031 .047 .140 .201 -.200 .350 .384 -.034 -.073
ethics
encouragement
socially
.191 -.375 .091 -.079 .231 .319 -.226 -.160 -.303 .135 .368 -.039 .375
responsible
SSB
.139 -.001 .863 .034 .040 .022 .171 -.072 -.004 -.030 .038 .120 -.004
independence
SSB discloses .279 .138 .768 .314 -.010 .134 .098 .043 .019 .033 .001 .065 -.027
SSB
.333 -.120 .585 -.036 .136 .195 -.073 .175 .398 .004 -.065 .166 -.121
responsibility
Top
management
.114 .230 .520 .067 -.031 .291 .343 .208 .278 .054 -.050 .192 -.012
shariah
compliance
SSB expertise .052 .401 .453 -.112 -.046 .135 .342 .027 .382 .100 .013 .378 .188
AAOIFI
.007 .017 .099 .848 .113 -.040 .151 .180 .137 -.010 -.063 .136 -.101
awareness
IFSB
.266 .016 .079 .746 .198 .031 -.029 .179 .093 .082 .172 .037 .103
awareness
SSB ____ -.005 .361 .046 .552 .127 -.068 -.087 .041 .030 .417 .140 -.025 -.143
Compostion of
.105 .441 .111 .500 .219 .038 -.066 -.002 -.010 .114 -.207 .341 -.168
Board
Shariah
.019 .232 .141 .465 .037 .326 -.264 .112 .220 .018 -.269 -.075 .267
knowledge
Bank's website
.136 .030 .067 .252 .899 .001 -.054 .064 .006 -.021 -.019 .031 -.035
checking
mails/e-mails
.047 .034 -.049 .177 .891 .136 -.025 .152 .075 .069 -.019 .040 .030
checking
Newspaper
.358 .069 .058 .035 .757 .073 -.141 -.084 -.092 .074 .094 .043 .153
checking
AGM invitation .489 .326 .026 -.192 .524 -.018 .018 -.157 -.011 .067 .037 .014 .104
Effective
complaints .226 -.172 -.028 .056 .050 .791 .170 -.058 -.135 .150 .048 .005 -.013
handling
Never
withholds .186 .078 .086 .101 .093 .743 -.059 -.007 .078 .032 .385 .099 .058
information
transparency .093 .063 .297 -.198 .081 .634 .102 -.108 .358 -.102 .026 -.210 .066
misleading
information .039 .036 .225 -.086 -.045 .002 .840 .064 .080 .119 .129 -.037 -.007
never
59
mistakenly
misleading -.155 .110 .068 .161 -.149 .070 .745 -.021 -.015 -.249 -.207 .136 -.148
information
BB regulation -.082 .084 .012 .214 .028 -.084 .182 .858 .036 .027 .005 .026 -.044
Govt regulation .104 .100 .096 .119 .058 -.019 -.108 .854 .129 .146 .064 -.022 .166
Recognizing
.173 .136 .017 .335 .047 -.012 .002 .179 .704 .129 .229 .040 .080
Profit or Loss
Compensating
balance -.135 .283 .341 .176 -.076 .121 .105 .082 .646 .170 .121 .079 -.051
disclosure
Obligation -.192 .176 -.084 .055 .035 .064 .084 .030 .026 .826 .116 .052 -.097
Credit risk
.270 .018 .106 .131 .056 .145 -.158 .158 .170 .708 .012 -.020 .136
disclosure
Safeguard -.008 .026 .002 .061 -.010 .157 .037 .040 .180 .087 .845 -.039 -.003
Price
-.106 .130 .175 -.265 .101 .519 -.124 .039 .076 .121 .612 .233 -.077
manipulation
SSB
.127 .097 .200 .139 .323 -.360 -.161 .021 .208 -.155 .026 .665 -.140
awareness
Top
management -.023 .271 .219 .106 -.147 .176 .354 .013 -.157 .160 .208 .615 .037
training
SSB
.186 .293 .196 .516 .189 -.007 .090 -.005 .118 .043 -.162 .552 -.074
composition
Undisclosed
.199 .207 .149 .184 -.098 .060 .015 -.194 .064 .079 .068 -.010 -.752
profits
Risk financing .182 .104 .206 .229 .091 .376 -.188 -.191 .268 .075 .052 -.162 .570

Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 42 iterations.
60
REFERENCES
Ahmad, A.U.F and Hassan, M. K. (2007), Regulation and Performance of Islamic Banking
in Bangladesh, Thunderbird International Business Review, Vol. 49, No. 2,
pp. 251277
Ahmad, N and Haron, S. (2002), Perceptions of Malaysian Corporate Customers towards

Islamic Banking Products and Services, International Journal of Islamic Financial
Services, Vol. 3, No. 1, pp. 13-29
Ahmed, M. and Khatun, M. (2013), The Compliance with Shariah Governance System of
AAOIFI: A Study on Islamic Banks Bangladesh, Journal of Islamic Economics,
Banking and Finance, Vol. 9, No. 3, pp. 177-191.
Almossawi, M (2001), Bank Selection Criteria Employed by College Students in Bahrain:

An Empirical Analysis, International Journal of Bank Marketing Vol. 19, Issue 3,
pp. 115-125.
Anas, E. and Mounira, B. A. (2009), Ethical Investment and the Social Responsibilities of
the Islamic Banks, International Business Research, Vol. 2, No. 2, pp. 123-130.
Arun, T.G. and Turner, J. (2004), Corporate Governance of Banks in Developing

Economies: Concepts and Issues, Corporate Governance: An International Review,
Vol. 12, No. 3, pp. 371377.
Bley, J., and Kuehn, K. (2004), Conventional versus Islamic Finance: Student Knowledge
and Perception in the United Arab Emirates, International Journal of Islamic
Financial Services, Vol. 5, No. 4.
Chapra, M. U. and Ahmed, H. (2002), Corporate Governance in Islamic Financial

Institutions, Occasional Paper No 8, Islamic Development Bank: Jeddah.
Dusuki, A.W. and Abdullah, N.I.(2007), "Why do Malaysian customers patronise Islamic
banks?", International Journal of Bank Marketing, Vol. 25, Issue 3, pp.142 160.
Erol, C. and El-Bdour, R. (1989) "Attitudes, Behaviour, and Patronage Factors of Bank
Customers towards Islamic Banks", International Journal of Bank Marketing, Vol. 7,
Issue 6, pp.31 - 37
Febianto, I. (2010), The Ethical Perspective on the Practices of Islamic Banking,

International Journal of Islamic Financial Services, Vol. 10, No. 3.
Gerrard, P. and Cunningham, J. B., (1997) "Islamic banking: a study in Singapore",

International Journal of Bank Marketing, Vol. 15, Issue 6, pp.204 216.
Haniffa, R. and Hudaib, M. (2007), Exploring the Ethical Identity of Islamic Banks via
Communication in Annual Reports, Journal of Business Ethics, Vol. 76, Issue 1,
pp. 97-116.
61
Hassan, A. and Chachi, A. (2008), Islamic Marketing Ethics and Its Impact on Customer
Satisfaction in the Islamic Banking Industry, Islamic Economics, Vol. 21, No. 1,
pp. 27-46
Hassan, M.K., Rashid, M., Imran, M.Y. and Shahid, A.I. (2010), Ethical Gaps and Market
Value in the Islamic Banks of Bangladesh, Review of Islamic Economics, Vol. 14,
No. 1, pp. 4975.
Khan, M.S.N., Hassan, M.K. and Shahid, A.I. (2007), Banking Behavior of Islamic Bank
Customers in Bangladesh, Journal of Islamic Economics, Banking and Finance,
Vol. 3, No. 2, pp. 159194
Naser, K., Jamal, A. and Al-Khatib, L.(1999), Islamic banking: a study of customer
satisfaction and preferences in Jordan, International Journal of Bank Marketing, Vol.
17, No. 3, pp. 135-150.
Othman, I. & Owen, R. (2001), Adopting and Measuring Customer Service Quality (SQ) in
Islamic Banks: A Case Study in Kuwait Finance House, International Journal of
Islamic Financial Services, Vol. 3, Issue 1.
Reaz, M. and Arun, T. (2006), Corporate governance in developing economies: Perspective

from the banking sector in Bangladesh, Journal of Banking Regulation, Vol. 7,
Nos. 1/2, pp. 94105.
Siddiqui, A. (1997), Ethics in Islam: Key Concepts and Contemporary Challenges, Journal
of Moral Education, Vol. 26, Issue 4, pp. 423- 431.
62

Customers' Perception of Ethical Issues in Corporate Governance of Islamic Banks in Bangladesh

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Customers' Perception of Ethical Issues in Corporate Governance of Islamic Banks in Bangladesh

Uploaded by

Copyright:

Available Formats

CUSTOMERS PERCEPTION OF ETHICAL

ISSUES IN CORPORATE GOVERNANCE

Dr. Muhammad Ziaulhaq Mamun

Course Instructor: Research Methodology

Institute of Business Administration

Nandita Hore (RH-67)

Rezwan Arefin (ZR-75)

Sawmik Islam (ZR-78)

Ishmamul Farhad (ZR-81)

M. Samiul Haque (ZR-84)

Saifur Rahman (ZR-89)

Lamia Hossain (RH-105)

Zahin Azad Moslem (ZR-121)

Batch: 20th, Section: B

Institute of Business Administration

Dr. Muhammad Ziaulhaq Mamun

Subject: Submission of the Report assigned in Research Methodology course

Here is the report on Customers Perception of Ethical Issues in Corporate Governance of

Nandita Hore (RH-67) Rezwan Arefin (ZR-75) Sawmik Islam (ZR-78)

Ishmamul Farhad (ZR-81) M. Samiul Haque (ZR-84) Saifur Rahman (ZR-89)

Wasif-A-Khoda (ZR-104) Lamia Hossain (RH-105) Zahin Azad Moslem (ZR-121)

Batch: 20th, Section: B

Table 1: Reliability Statistics (Cronbachs Alpha) 9

Table 41: Coordination Schema 52

1.2 Research Background

Islamic Banking in Bangladesh

Corporate Governance and Shariah Compliance

1.4 Research Question

1.5.1 Broad Objective

1.5.2 Specific Objectives

Specifically, this study will look into:

a) Awareness of customers about the corporate governance structure and competence of

c) Knowledge of the customers regarding ethical disclosure of information by Islamic banks

The hypotheses pertaining to each specific objective are given below:

Parameter 1: Corporate governance structure and competence of Islamic banks

Parameter 2: Compliance of Islamic banks to Shariah rules

Parameter 3: Ethical disclosure of information by Islamic banks

Other Factors Related Hypotheses

Hypothesis 18: There is correlation between respondents formal Islamic education

The limitations of this research are given below:

2.1.1 Primary Data Collection

2.1.2 Secondary Data Collection

2.3 Sample Size

n = (Nz2pq) / (Nd02+z2pq), where

n = sample size N = population

now, n = (Nz2pq) / (Nd02+z2pq)

therefore, n = (z2pq) / d02

Therefore, the application of formula will be thus

Calculation of sample size

Calculation of sample size

2.4 Sample Frame

2.5 Questionnaire Development

2.7 Reliability of Data

Table 1: Reliability Statistics (Cronbachs Alpha)

Reliability Statistics (using Alpha technique)

Table 2: Reliability Statistics (Cronbachs Alpha and Split-half Technique)

3.2 Customers Attitude towards Islamic Banks

Although no literature is available on customers perception of corporate governance of

4.1 Parameter 1- Corporate Governance Structure and Competence

4.1.1 Categorical Response Index

Index for the response of the following statements is-

Table 3: Frequency of Responses for Parameter 1

Table 4: One Sample t-test for Categorical Response Index