Depicting ethical dilemma in Islamic financial institutions; addressing the gender heterogeneity

Abstract

Though the lex loci applicable to Islamic financial institutions (IFIs) are derived from Shariah that embeds ethical and moral values, IFIs still face ethical dilemma. Since the leadership and managerial roles are played by both genders, it is imperative to understand the implication of their contribution in this. As such, the objective of this paper is to examine the influence of gender using the aspects of al-Ghazali’s ethical philosophy in explaining the formation of ethical and unethical behavior within the purview of the Islamic finance industry of Malaysia, where both genders play a pivotal role in the industry. A total of 418 samples were collected from IFIs in Malaysia using a purposive sampling technique, and the empirical analysis was conducted with the measures of model fit and bootstrapping technique using Partial least square Structural equation modeling and Multi-group analysis. The empirical findings indicate the dedicated use of intellect in making decisions related to ethical issues where desires and emotions tend to overwhelm reason and human choices. While divine knowledge is found ineffective guidance of the intellect, the element of satanic force is found to significantly impacting decision-making. As the lack of religious consciousness is evident among respondents, higher exposure to operational risk is expected. These findings were found identical among both genders under study. Findings suggest respective authorities of Islamic financial institutions to intensify the capacity-building programs on the foundation of faith which includes Islamic thought and worldview, to enhance the corporate ethical decision-making irrespective of gender.