In providing further meaning to the results, this section aims to provide further reflections on the results by classifying and ranking the sampled countries in terms of their CGI and RMI level.
As shown in Table 5.35, no countries have a ‘very high’ disclosure in either CGI or RMI performance, as the CGI and RMI mean scores are low, at 0.25 and 0.51 respectively as reflected in Table 5.35. The discussion in this section is based on the performance level of the sampled countries in terms of CGI and RMI.
Very High or Best Practice
As shown in Table 5.35, no country shows a ‘very high’ disclosure in the overall CGI. Even though there are a number of banks in each country with ‘very high’ CGI, this is offset by some banks in the same countries which have ‘very low’ CGI. This is attributed to the ‘very low’ disclosure in certain dimensions such as Shari'ah and ethics. For example, there is no doubt that some banks have shown very good progress on CG compliance dimensions (as observed in the later stage of the year 2000s); however, this was not the case before the banks adopted CG principles. As for RMI, no country demonstrates ‘very high’ disclosure on RMI. This could be attributed to a few factors.
Similar to CGI, there is always the case that some banks in the countries have ‘very high’ disclosure but this is offset by the banks with ‘very low’ scores. Annual reporting also contributes towards disclosure, as some banks do not have an adequate coverage of RM area in the ARs.
High Performance
Similarly, none of the countries show ‘high’ disclosure in CGI. There are also cases that some countries do not even have a score for any of the CG statement, and this gives the impression that they have not adopted a CG code. Perhaps this is due to the absence of CG awareness or the failures of the regulative bodies, since CG is not
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mentioned anywhere in the annual reports and this could be one of the reasons why no countries indicate ‘high’ CGI disclosure.
On the other hand, Malaysia, Turkey, and the UK show ‘high’ RMI disclosure. This could be attributed to regulative intervention. In addition, the socio-economic status of the host countries itself may influence the disclosure level. For this, Malaysia, Turkey, and UK have reached certain socio-economic levels that require best practises to be in place in IBs to be able to compete in their respective countries. As far as these countries are concerned, they have strict policies in the form of regulatory directives that ensure compliance on RM.
In reflecting on the sampled countries through their particular economic progress and democratic consolidation level, there is a possibility of country-specific factors that affect RMI and also of CGI disclosure. For example, developed countries, such as the UK, are more open in terms of disclosing information. This reflects that some initiatives must have been put in place to push these 3 countries towards current disclosure levels. Malaysia for instance has been very committed in its initiatives to ensure high standards in its IB operations.
As far as the overall RMI is concerned, improving disclosure should be one of the strategies of the countries in question to be competitive in trying to attract Islamic investment funds. Malaysia has come up with series of financial master plans for the financial sector. As for Turkey, the banks have moved some steps ahead, following their adoption of a CG code. They have implemented their own corporate governance code, a framework that has to be adhered at bank levels in the country. Similarly, the UK has been very serious in maintaining transparency and thus disclosure is in one of the agendas to deal with.
Moderate Practice
The ranking ‘moderate’ is the best classification attained by the overall CGI disclosure. This is represented by Malaysia with its ‘moderate’ score in the overall CGI. To a certain extent, from the CG viewpoint, this somehow shows that Malaysia is comparatively more transparent than any other country. This is partly due to government initiatives to help support banking operations. The regulator has been
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persistent and consistent in ensuring the adequacy of guidelines and directives for the banks to adhere to.
As the results show, the ‘moderate’ classification for the overall RMI is represented by two countries: Bahrain and Saudi Arabia. This is anticipated as Bahrain is the home for guidelines while Saudi Arabia’s ‘high’ disclosure is because of ownership structure. This may imply that for countries with banks that have high privately-held shareholding, the level of disclosure is determined by the discretion of the main shareholders.
Low Practice
Bahrain and Jordan show ‘low’ disclosures in CGI. Bahrain is quite unexpected as this is the country from which IB standards and guidelines are issued through the AAOIFI. In addition, AAOIFI standards are mandatory for Bahraini Islamic banks. Nevertheless, there are some banks with no CG awareness, which brings down the country’s disclosure level. Similar cases occur with Jordan when one sampled bank under-performed in CGI disclosure. The ‘low’ classification for the overall RMI is represented by Qatar, UAE, and Pakistan. Qatar also has the same problem as some banks in the country do not have good disclosure in risk management.
Very Low Performance
The overall CGI score is ‘very low’ for 12 countries. This includes: Indonesia, UK, Turkey, SA, and UAE. The reason could be due to lack of political will and regulative efficiency in the form of directives towards attaining best practices. In general, almost all banks in this disclosure group are from the countries that have not established their corporate governance code. As for RM, the overall RMI disclosure is ‘very low’ for 7 countries including: Bangladesh, Jordan, Kuwait, Sudan and Indonesia, and Egypt and Yemen. This could be due to similar reasons as CGI, i.e. some banks with ‘very low’ disclosure in these countries may affect the individual country’s level of disclosure. It could be that for some banks, the necessity to improve their communications is not so pressing, which may be justified by the modesty and simplicity of its AR reporting.
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