Have the Indonesian Islamic Banks Embarked on Value-Based Intermediation? A Content Analysis

This paper intends to identify whether the practice of Islamic banks in Indonesia is in line with value-based intermediation (VBI) and reporting disclosures in annual reports to achieve their fundamental goals of human-centered economic development and social justice. It examines the extant current reporting practice of Islamic banking in Indonesia through an analysis of the content of the annual reports of Islamic banks in Indonesia. A qualitative descriptive approach was employed through content analysis on annual reports of 14 Islamic banks in Indonesia from 2018 until 2020. The timeframe was selected as the research period to avoid the effect on the publication of annual reports due to the biggest merger of three Indonesian Islamic banks in 2021. The findings show that value-based intermediation (VBI) has not been fully translated into practice by Islamic banks in Indonesia. While the calculated VBI scores relatively show quite sufficient VBI reflection on annual reports by the Islamic banks in Indonesia yet, a certain dimension particularly on social matters is still very minimal. This paper's particular contribution is identifying VBI practices and related disclosures in the Islamic finance industry, particularly in the Indonesian banking industry. It provides important evidence for the global movement towards value-based banking and VBI in particular for the Islamic financial industry which are demanded to move beyond mere shariah compliance but towards holistic attainment of Maqasid Shariah.