ASSIGNMENT

Assigned by:

Mam Samavia Munir

Submitted by:

Shehzad Ahmed ( bsf1804556)

Topic:

Muslim Society Perspective on Islamic Banking and Micro to Small Family-Owned

Businesses in Pakistan

Program: BBA (Hons) 8th Section:B

University of Education Lahore/Multan Campus

Muslim Society Perspective on Islamic Banking and Micro to Small Family-Owned
Businesses in Pakistan

ABSTRACT: This paper aims to shine a light on how Islamic banks implement their corporate social
responsibility from the perspective of Islam. This study employed a qualitative case study qualitative. The
data were gathered through direct observation and by filling the questionnaire with the bank staff and
societies who received CSR initiatives. This study elaborate that how Muslim society percept about the
regulation of Islamic banks and how they think about the adoption of Islamic banks. Our study found the
perception of Muslim society towards family owned businesses. Our study found that Islamic banks have
implemented their CSR initiatives based on government regulation and Islamic law and teachings. CSR
includes the realization of Islamic economy responsibility, the compliance of the banks to government
regulation and Islamic law, and practicing Islamic philanthropy.

KEYWORDS: Islamic banks, Muslim Society perception, Small Family – Owned Business, Ownership
Control.

INTRODUCTION

Banking is a financial institution that influences the community's economy, and it drives economic
development, increases job opportunities, and supports the business world (Filho, Carvalho, Silva, &
Scalfoni, 2012). Islamic banks are also one of the banks that have played an essential role in the economic
development of the Muslim community (Wajdi Dusuki, 2008). One of the roles of Islamic banking in the
development of community welfare is through the implementation of corporate social responsibility
programs, which is an effort to support the country's sustainable development (Dorasamy, 2013).
The implementation of corporate social responsibility provides long-term benefits for increasing company
value (shares), maintaining company legitimacy, increasing sales, and making people participate in
maintaining the company's existence (Gyves & O'Higgins, 2008; Panwar, Rinne, Hansen, & Juslin,
20006). With the policy of implementing corporate social responsibility, a modern company plays an
important role and contributes to society and the environment because corporations are entities with
economic, legal, ethical obligations, and philanthropy (Ihlen, 2008; Searcy, Dixon, & Neumann, 2016).

In business ethics, the important role of Islamic-based companies is not only oriented to corporate
benefits but also social benefits so that the presence of Islamic principles in Islamic business ethics is
compulsory (Basheer, Hameed, Sabir, & Jehangir, 2019). Moreover, in running their business, Islamic-
based companies, such as Islamic banking, are concerned with the reality of everyday life with Islamic
values. In this regard, managers of Islamic banks must comply with Islamic ethical principles and
traditions by developing and applying a balanced business philosophy.

Likewise, Islamic banking is a business entity that focuses on Syariah provisions and achieving sharia-
based profits. However, the banks are also required to provide social responsibility to the community as a
form of good practice, as stated in the Qur'an. Islamic corporate social responsibility (ICSR) is derived
from the principles of the Qur'an and hadith with three major dimensions, namely the representatives of
humankind on the earth, accountability to God, and the obligation of humankind to do good and stay
away from bad deeds (Adnan Khurshid, AlAali, Ali Soliman, & Mohamad Amin, 2014; Elasrag, 2015).

Most people in pakistan are Muslims who have the right to know various information on the activities of
organizations and companies that are carried out to see whether they are in accordance with Syariah rules
and achieve the goals set in Islamic teachings. The level of disclosure of Islamic banking social
performance in Southeast Asia is still in a less informative position, with a score of 55.35% (Abdullah,
Percy, & Stewart, 2015). In addition, various corporate social responsibility programs have not been felt
concretely by the community (Ismail, Alias, & Mohd Rasdi, 2015). In fact, many Muslim communities do
not understand the purpose and benefits of various social responsibility programs carried out by various
Islamic banks.
Regarding the objectives and real benefits of Islamic banking corporate social responsibility programs in
pakistan from the perspective of the Muslim community, there is a lack of studies. Few studies on Muslim
perception of Islamic bank corporate social responsibility implementation might cause a lack of
understanding of academia and practitioners. The view of the benefits of Islamic banking corporate social
responsibility programs is always associated with Islamic teachings, especially the legal sources, namely
the Al-Quran and hadith from the Prophet Muhammad. This study, therefore, examines the perspective of
the Muslim community on the benefits of corporate social responsibility programs based on Islamic
values derived from the hadith of the Prophet Muhammad related to the economy.

The purpose of this study is to provide a new understanding of the views of the Muslim community on the
benefits of Islamic banking corporate social responsibility programs. Thus, in the future, the
implementation of Islamic banking corporate social responsibility is in accordance with the expectations
of the Muslim community and the environment.
Literature Review

Islamic banks

There are several definitions of Islamic banking. The OIC General Secretariat has agreed to the following
concept of an Islamic bank: “An Islamic bank is a financial entity whose position, laws, and procedures
specifically state adherence to Islamic Shariah principles and the prohibition on the collection and
payment of interest on any of its activities”.
The Islamic banking industry has grown rapidly since the early 2000s (Safiullah and Shamsuddin, 2018).
Islamic banks (IBs) differ from their conventional counterparts in their functions, structure, and objectives
(Mohammed and Muhammed, 2017a). Islamic banking is rapidly expanding, and all Islamic and non-
Islamic countries have now established one or more forms of Islamic financing (Siddiqi, 2000; Jaffer,
2006).
The main difference distinguishing the IBs from conventional banks (CBs) is the absolute
prohibition of interest (riba) (Ghayad, 2008) and business relating to alcohol, gambling, and excessive
speculation (Zirek et al., 2016). Basically, IBs must guarantee that all of their products and operations are
compliant with the Sharı’ah rules and principles (Grais and Pellegrini, 2006a). Pakistan has lately become
a leading country in Islamic banking and finance (Salaam Gateway, 2020). Pakistan’s Islamic finance
industry has registered notable performance and rapid transformation (Yuksel and Can € €oz, 2017;
Hajjar, 2019). Pakistan has become an exemplary country for others that need to increase their Islamic
banking and finance market share (Salaam Gateway, 2020). The interest-free principle is applied using,
among others, the murabaḥah contract, in which the bank purchases products that the customers want
from vendors and sells them to the customers on instalments. Financing is also provided based on
partnership and lease contracts (Participation Banks Association of pakistan, 2020). As well, Tabash and
Anagreh (2017) stated that Islamic finance has enhanced investment and economic growth.
Besides,Kassim (2016), Boukhatem and Moussa (2018), Ledhem (2020), Ledhem and Mekidiche (2020)
and Ledhem and Moussaoui (2021) confirmed that economic growth is endorsed by the factor of Islamic
finance, which has been used as an exogenous factor within the endogenous growth model.

Boukhatem and Moussa (2018) presented strong evidence that Islamic finance boosted economic
development in 13 countries of the Middle East and North Africa (MENA) by using fully modified
ordinary-least-squares regression and panel cointegration over the period 2000–2014. The Islamic
banking industry has general characteristics inherent in the banking industry, namely an industry that is
heavily regulated and an industry based on trust.
The Islamic banking system in pakistan is implemented with a profit-sharing principle system,
prioritizing the value of togetherness, ukhuwah, and avoiding speculative elements in each transaction
(Alamsyah, 2010). Islamic banks are financial service providers that operate based on Islamic ethics and
value systems, especially those that are free from interest (usury), free from non-productive speculative
such as gambling (maysir), free from unclear and doubtful things (gharar), have the principle of justice
and only finance business that is lawful (Munawir, 2005 .To discuss the risk profile and cost effectiveness
of Islamic banks, risk sharing among the parties involved (borrower, lender, and bank) contributes to less
speculation and the growth of low-risk financial instruments (Arouri et al., 2013).

For the first time in the country's history, General Muhammad Zia-Ul-Haq introduced the concept of
Islamic banking. It began with the intention of removing interest from financial institutions first, and then
gradually from all banking transactions. During the years 1981-1985, conventional banking gradually
gave way to Islamic banking. As a result, by the end of 2017, there were 21 banks offering Islamic
banking products and services, with 5 of them being full-fledged Islamic banks with 1,256 branches
across the country(Shaukat & Raisi, 2017). Because conventional banks are more innovative than Islamic
banks, the two banking systems are in direct competition. Because both types of banks provide similar
services and products to their customers, competition between them grows (Iqbal & Molyneux, 2005).
The extent to which customers use Islamic banking is determined by two factors. The first factor is their
understanding of Islamic banking. The second factor is how well they understand the services, products,
and systems of Islamic banks. Only then will they be able to make sound purchasing decisions.Islamic
banks do not invest in gambling, the trading of alcohol, pork, tobacco, beverages, or any other business
activity that is detrimental to people's health, the environment, or society. Conventional banks, on the
other hand, may invest in any type of trade or business that is unknown to the customers (Dusuki &
Abdullah, 2007).

Meezan Bank is the first and biggest Islamic Bank in Pakistan, providing a complete retail and business
financing product suite. Meezan Bank has approx. 55% share in total Islamic Banking industry of
Pakistan. Meezan Bank is the Joint financial advisor to the Ministry of Finance for the issuance of GOP
sukuks.The bank has been awarded the Best Bank award in 2018 and 2020 by the Pakistan Banking
Awards. JCR-VIS has awarded Meezan Bank AAA rating. Islamic banking is, on the one hand, a product
of rapidly and actively developing international economic relations in both the countries of the Islamic
world and non-Islamic states (Osipov G, 2015).On the other hand, Islamic Banking itself is a powerful
mechanism for influencing the modern character of international socio-economic relations.
Muslim Society Perception

Islamic corporate social responsibility (ICSR) is derived from the principles of the Qur'an and hadith and
has three major dimensions: humankind's representatives on earth, accountability to God, and
humankind's obligation to do good and avoid bad deeds (Adnan Khurshid, AlAali, Ali Soliman, &
Mohamad Amin, 2014; Elasrag, 2015). In our opinion, this strengthens migration flows from Islamic
countries and regions, forming new relations in the host community (Akramov Sh, 2015; Gabdrafikov I,
2015; Karabulatova I, 2016), transforming the personality of each member of society (Karabulatova I,
2013; Osipov G, 2015) as a result. In the modern world, a new concept of social and economic
development is increasingly developing, bringing cultural resources and creativity to the forefront of the
modern, post-industrial economy. This innovative sector is called creative or creative industries. Creative
industries are activities that are based on individual creativity, skill or talent, and that carry the potential
to create added value and jobs through the production and exploitation of intellectual property
(Zelentsova E, 2016).

In other words, in relation to the state and society, religion was a cementing foundation, but the
effectiveness of this foundation, the strength of its defensive power, depended to a large extent on itself.
At the same time, we are witnessing the promotion of Islamic banking on the Internet, which makes it
possible to speak of a “network war” in the capital sphere (Barsukov P, 2015; Karabulatova I, 2016),
which uses various ethnopsycholinguistic strategies to influence the potential consumer of this banking
service and a gradual transformation of its internal world view and linguistic bases in general (Kamal N,
2016; Karabulatova I, 2013; Karabulatova I, 2015; Osipov G, 2015).

In the Arab countries, the issue of “Islamic government” or “Islamic government” occupies a special
place due to the close connection of society with the ideology and heritage of Islam (Kamal N, 2016,
Khairullina N, 2015, Osipov G, 2015). Thus, the formation of new types of promotion of Islamic banking
is due to the nature of the modern electronicinformation society, increased migration flows, primarily
from countries and regions with a predominantly Muslim population (Akramov Sh, 2015; Ryazantsev S,
2015). This situation requires a more balanced approach to the analysis of financial institutions with the
use of new forms of attracting cash flows for an objective assessment of the consequences of the
penetration of Islamic norms of ethics and morality. According to one report, the compound annual
growth trend of global Islamic banking assets from 2009 to 2013 was 17.6 percent. By 2018, an estimated
annual growth rate of 19.7 percent is predicted (EY, 2014).
Islamic banking has the potential to assist disadvantaged communities such as farmers and SMEs, as well
as to promote sustainable economic development (Fasih & Huda, 2012). Islamic banking is a good choice
not only in Muslim countries, but it is also a growing financial alternative in many Western countries,
owing to ethical and moral laws, as well as a perceived higher risk perception. Nonetheless, few people
are familiar with the history of this rapidly growing industry, so predict high growth rates in Islamic
finance in the coming years.

As a result, it is important to remember that Islamic banking is also a high priority today, with almost
every major bank developing separate Islamic banking branches, the true aim of Islamic banks in the case
of social welfare vs benefit maximization(Abedifar et al., 2014;Khan, 2010).

Since Islamic banks' business models are based on Islamic law, Shariah, which represents religious
values, has its own ethical identity. Shariah values were developed primarily to foster not only religious
faith but also social welfare and justice. Islamic banks also impose social targets such as charitable
donations and generous loans to economically vulnerable individuals (Haniffaand-Hudaib, 2007). The
aim of Islamic banks is to fully integrate legal, environmental, and social issues. In reality, this concerns
not only consumers and the general population, but also the participating sectors. This ensures that
businesses that serve as partners of Islamic financial institutions should be limited in their ability to cover
any forbidden transactions, and their business models must be consistent with Shariah's religious, legal,
and ecological objectives(Mohamad, 2014). Islamic banking, which uses Islamic law values as its
foundation, has grown in importance in the global financial market in recent decades. Islamic banks have
developed themselves as viable alternatives in the global financial industry, offering a wide range of
goods and services.

Islamic banking plays a role in the development of community welfare by implementing corporate social
responsibility programmes, which are an effort to support the country's long-term development
(Dorasamy, 2013). Implementing corporate social responsibility has long-term benefits in terms of
increasing company value (shares), maintaining company legitimacy, increasing sales, and engaging
people in the company's survival (Gyves & O'Higgins, 2008; Panwar, Rinne, Hansen, & Juslin, 20006). A
modern company plays an important role and contributes to society and the environment by implementing
corporate social responsibility policies because corporations are entities with economic, legal, ethical, and
philanthropic obligations (Ihlen, 2008; Searcy, Dixon, &Neumann et al., 2016).The importance of
Islamic-based companies in business ethics is not only oriented to Corporate benefits, but also social
benefits, necessitate the inclusion of Islamic principles in Islamic business ethics (Basheer, Hameed,
Sabir, & Jehangir, 2019). Managers of Islamic banks must comply with Islamic ethical principles and
traditions by developing and applying a balanced business philosophy. However, as stated in the Qur'an,
banks are also required to provide social responsibility to the community as a form of good practise.

The majority of people in Pakistan are Muslims who have the right to know various information about the
activities of organisations and businesses to determine whether they are in accordance with Islamic rules
and achieve the goals set forth in Islamic teachings. With a score of 55.35 percent, the level of disclosure
of Islamic banking social performance in Southeast Asia remains low (Abdullah, Percy, & Stewart,
2015). Furthermore, the community has not felt the impact of various corporate social responsibility
programmes (Ismail, Alias, & Mohd Rasdi, 2015).

There is a lack of research on the objectives and real benefits of Islamic banking corporate social
responsibility programmes in Pakistan from the perspective of the Muslim community. Few studies on
Muslim perceptions of Islamic bank corporate social responsibility implementation may lead to a gap in
academic and practitioner understanding.The benefits of Islamic banking corporate social responsibility
programmes are always linked to Islamic teachings, particularly legal sources such as the Al-Quran and
hadith from the Prophet Muhammad. As a result, this study investigates the Muslim community's
perspective on the benefits of corporate social responsibility programmes based on Islamic values derived
from Prophet Muhammad's hadith. Thus, in the future, the implementation of Islamic banking corporate
social responsibility will be in accordance with the expectations of the Muslim community and the
environment.The expansion of Islamic banking in Pakistan is expected to benefit society. The study
employs the Vector Error Correction Model (VECM) analysis on panel data spanning the years 1980 to
2012. As a result, they discovered a positive relationship between Islamic banking financing and  society's
well-being.
Islamic banking is regarded as a new wave of corporations in which social goals are as important
as profits (Haniffa & Hudaib, 2007; Zafar & Sulaiman, 2019). The term Islamic, as previously stated,
reflects real economic activity, social and economic development (Platonova, 2013), and it is an
institution built with the ideology of social welfare and well-being in mind (Cebeci, 2012). Regardless of
financial consequences, positive or negative, social preference and responsibility are regarded as the most
important goals of Islamic banking (Dusuki, 2008; Dusuki & Abdullah, 2007). Pakistan's economy is also
in development, with issues such as governance, poverty, and social and economic development (Husain,
2018; Zaidi, 2005). Aside from the social and economic significance of Islamic economics, finance, and
banking for an emerging and developing economy, Pakistan is a country whose constitution also insists
on an Islamic social and economic structure (Islamic Research Institute, 2009). Initially, the government
began to implement reforms as a whole, and also declined to participate in dual economy or banking in
the early 1970s of the world's Islamic banking evolution (Iqbal & Molyneux, 2005, p. 64). However, after
nearly four decades of testing, the government's strategy has failed miserably (Khan & Bhatti, 2008).

The State Bank of Pakistan granted the first Islamic banking licence to Meezan Bank in 2002, with the
vision of making Islamic banking the first choice for users in Pakistan (State Bank of Pakistan, 2007b).
After one and a half decades, Islamic banking in Pakistan has an overall 13.5 percent share of the banking
sector in terms of assets and 15.5 percent in terms of deposits, with 2851 branches located throughout the
country (State Bank of Pakistan, 2018a).  Furthermore, the State Bank of Pakistan planned to increase the
share of Islamic banking to 20% by 2020. (State Bank of Pakistan, 2014b).

Family – Owned Business and Ownership Control

The following are two widely accepted definitions of Family Business – the first shows how family-
owned businesses were viewed in the past, while the second shows how they are viewed today:
"A company is considered a family business if it has been closely associated with at least two
generations of a family and if this link has had a mutual influence on company policy as well as the
family's interests and objectives." Donnelley (1964).
"A family firm was defined as a company in which the ultimate owner or the
large owner was a family or an individual who held more than 10% of the voting rights." (Sacristan-
Navarroa, Mara, 2011)A family business is controlled and/or managed by a coalition of members of the
same family or a small number of families to create and pursue the firm's mission in a way that is
potentially sustainable across generations (Chua, Chrisman, and Sharma; 1999).A family-owned or
family-managed business is one that includes at least two members of a family who have financial control
over the organisation (Fernando Muoz-Bullón, 2011).

The family business is the oldest and most common type of economic organisation. In a family business,
two or more members of the management team are recruited from the owning family. Non-family
members may own a family business. Individuals who are not family members can also run family
businesses. Family members, on the other hand, are frequently involved in the operations of their family
firm in some capacity. One or more family members are usually the senior officers and managers in
smaller businesses. Many of Pakistan's publicly traded companies were once family businesses. Family
businesses also face a unique set of management challenges stemming from the overlap of family and
business issues (Family-Owned Business, 2021), In Southeast Asia, family-owned businesses account for
65 percent of all registered businesses. According to Harvard Business School, family businesses account
for 66 percent of all organisations around the world. A family-managed business is one that is effectively
claimed or potentially overseen by more than one member of a similar family.
Family-owned companies make the most significant contributions to today's business world. According
to the International Finance Corporation (IFC), family-owned businesses account for approximately 75%
of all global business (IFC, 2018).Some family owned businesses names are adam motor
company,airblue,airsial,allied bank ,askari bank. Research on family businesses began to increase in
frequency in the early 1980s, but it was not until the mid-1990s that it reached a plateau (Luis R. Gomez-
Mejia, 2011). For family businesses, family values are critical.(W. Gibb Dyer, 2003) investigated
objectives and values as two critical "family factors" that influence behaviour in familya-centric
organisations. (Luis R. Gomez-Mejia, 2011) identify idiosyncratic family values as one of three
components, along with emotion and altruistic behaviour, that give the family business a distinct flavour.

In general, there are three types of Family Businesses (Jargons, 2021), each with its own structure but all
falling under the umbrella of Family Business:
1) Family-owned business– A business in which a family or family members own the majority of the
stock.
2) Family-owned and led businesses – The controlling size of power in this type of business is in
the hands of a single family or a family member. Control of ownership allows the family to creat and
define goals, methods, and guidelines.
3) Family-owned and managed businesses – where, in addition to a majority stake in the
company, at least one family member serves on the board of directors. If a business meets certain criteria,
it is classified as a Family Business. The ownership percentage, voting rights, decision-making power,
involvement of one or more generations, active management by family members, and other criteria are
used to define family businesses (Melissa Carey Shanker, 1996).

Many businesses fail because you will find greed, ego, sibling rivalry, lack of leadership, and other
factors contributed to the company's failure as a family business, and the companies were eventually sold
out (Sekulich, 2019). While studying failed family business case studies in deep we had realized that
some really important factors were missing. These factors are: 1) Succession Planning, 2) Lack of trusted
advisors, 3) Poor corporate governance, 4) Family conflict, 5) Poor strategic planning, etc.Economic
conditions and circumstances have an impact on business, social, political, economic, and technological
developments, as well as changes in stakeholders' attitudes and perspectives (Yunia, 2020). Paying
attention to humans, humanising humans, and taking steps in harmony with all stakeholders, participants,
and the environment in which the business operates can help business owners maximise profits more
effectively (Carroll, & Shabana, 2010).
Family-owned businesses are typically small businesses (Gómez-Meja et al. 2007), and these small
businesses face challenges in managing their operations, obtaining financing, and remaining competitive
in their respective economies (Ahmad and Seet 2009; Everett andWatson 1998; Watkins 2007).
Business The word most commonly associated with how to succeed in business within Islamic culture is
the Holy Qur'an (Beekun, 2004). The Qur'an and Hadith (Sunnah), or the sayings of Prophet Mohammad,
provide a set of moral standards for Islamic business ethics (Abuznaid, 2009). So, from an Islamic
standpoint, how to develop success must be founded on the Qur'an and Hadith, and the company must
have an ethic.

According to international journal of advanced multidisciplinary scientific research(IJAMSR)There are

two levels to ethics.The first is ethics toward God, the creator. A Muslim must believe in God and adore
Him. The second aspect is interpersonal ethics; a Muslim businessperson must interact with others
ethically by treating them well and maintaining good relationships.

As a result, Islamic ethics is based on tawhid, or oneness, which establishes the oneness of God and man,
man and man, and man and his environment (Alhabshi, 1993; Abuznaid, 2009). As a result, ethics is
a prerequisite for business interactions. As an inheritance, the business becomes a family business, and
the heirs become partners in the company. They split the equity (after paying off debts and demands).
This means that the business should continue to operate in order to provide income to the heirs. As a
result, the heirs will be able to live comfortably as long as the business exists. This paper adds to the
literature on business replacement from an Islamic accounting perspective, as previous studies do not
appear to have taken this into account (Umar and Kurawa, 2019). The benefits of inherited business
continuity extend beyond the heirs to society as a whole.According to Afghanistan and Wiqar (2007),
Islamic heritage is consistent with the principle of wealth division, which prohibits the concentration of
wealth in one family, individual, or group of individuals. Specifically, if the business continues to
operate, the payment of business zakat will continue (Haniffa and Hudaib, 2011). As a result, inherited
businesses can make a significant contribution to the community's socioeconomic development. Islamic
accounting differs from conventional accounting in that it is the polar opposite of single-minded self-
interest (Ismail and Muhamad Sori, 2017).

The business is known as al-tijarah in the Qur'an, and the Arabic term is tijaraha, which comes from the
core words tjr, tajara, and tajranwatijarata, which all mean trade or commerce. Attijaratunwalmutjar
means "commerce" in English (according to the al-Munawwir dictionary). The difference between
business in Islam and business in general is that you must submit to and follow the Qur'an, As-Sunnah,
Al-Ijma, and Qiyas (Ijtihad), as well as the constraints set forth in these sources.
AlBaqarah (282), An-Nisaa (29), At-Taubah (24), An-Nur (37), Fatir (29), As-Shaff (10) and Al-Jum'ah
are some of the verses in the Qur'an that discuss business (11). "There are two types of pricing: legal and
illegal," according to Ibn Taimiyah, as described by Yusuf Qardhawi (1997). There is injustice that is
prohibited, and there is justice that is permitted, Tas'ir.

Furthermore, Qardhawi stated that if the price is set by coercing the seller into accepting an unfavourable
price, religion does not justify this behaviour. However, if the price is set to ensure fairness for all
members of society, such as by enacting legislation prohibiting sales above the official price, it is legal
and must be followed. However, if the price is set to ensure fairness for all members of society, such as
by enacting legislation prohibiting sales above the official price, it is legal and must be followed.

Theoretical Background

The background of Islamic banking in Pakistan has three main phases (Table 1), first, the political
motives behind the foundation of Pakistan, secondly, the role of government in transformation of
economic structure into Islamic during year 1960 to 2000, and third phase involves, the government
strategy after year 2000, that to move both sectors parallel, conventional and Islamic.The current study is
based on various theoretical assumptions that may influence society satisfaction levels. Regarding
previous researches, it was found that Islamic banking generally has a positive effect on the economy and
society. However, it is necessary to conduct further research on the influence of Islamic banking on the
welfare of society and family owned businesses. This research is intended to bridge the gap that occurred
in previous research that mostly showed the influence of Islamic banking on society and economic
growth. This study also uses the latest panel data with a more extended period than the previous studies
(from 2014 to 2019), so that the research results are expected to show the real situation. According to the
study of Harvard Business School in 2012, around 70% of family businesses fail or sold out during the
first generation and as per the Conway Centre for Family Business, just 12 percent of all family
businesses are suitable into the third era, which means that 88 percent of family businesses could not past
the second. The previous researcher investigated the ethnic nature of the family business's success. Dean
(1992) discovered that African American family company owners have documented business plans and
rules, report minimal disagreement and uncertainty regarding the family business, have no succession
plan, and emphasise specific racial and ethnic problems. The benefits from inherited business continuity
are not only limited to the heirs but also society at large.
Relationship
This paper investigates the relationship between Islamic banks, muslim society perception and ownership
control of family owned businesses using data for the period from 2020 to 2022. The primary 6 source of
financial data is “Islamic Banks and Financial Institution Information” database a division of the Islamic
Research and Training Institute (IRTI). it is also deemed appropriate to address the future of Islamic
banking. While several reports have been conducted on projected development in the coming years, it is
unknown how this growth will impact the Islamic banking sector as well as the how Islamic banks and
muslim society will impact the small family owned businesses and their ownership control in the future.
This study is important not only for understanding the characteristics of family businesses in a society
that heavily relies on them, but also for analysing how muslim society will effect the family owned
businesses and their ownership control. According to international journal of advanced multidisciplinary
scientific research(IJAMSR) It aims to illuminate the major factors and characteristics of family
businesses that have been discussed in the literature, such as ownership and professionalisation,
company–family ties, succession, and management methods. To be sure, the findings of this study can be
compared and discussed with family businesses in other countries and industries.There is a need to study
the background and current-state of Islamic banking, point out the issues and challenges, and suggest the
avenues of future policy for prompt growth and how family businesses will boom or effect with muslim
society and Islamic banks.

Hypotheses

 Social influence positively affects customer intention to adopt Islamic banking services.
 Religiosity positively affects customer intention to adopt Islamic banking services.
 There is a significant impact of Islamic banks on the family owned businesses.
 How ownership of family business will be shared according to islam.
Research Model

Muslim society

Islamic Banks
Family business

Ownership control

V Figure 1.3 showing the direct relationship of I.V and D.V

Sampling Procedure

Two type of data collection method are used “Primary and Secondary”. The Primary data were collected
within one month (June-July, 2022) using survey questionnaire adapted and secondary data are use in
literature review. The sample size of the study consist 100 respondents and we distributed questionnaires
to the sample. The survey consisted of two major sections. The first section intended to gather
background information of the respondents such as gender, age, education, marital status, qualification,
and experience. The second is examined about the organizational culture and employee performance.

Pilot Study
The questionnaire was constructed based on the literature review. A pilot study was conducted in
which the questionnaires were randomly distributed. A response of 100 samples was collected. The
reliability was tested and the Cronbach Alpha read more than 0.5 which indicated the questionnaire was
reliable.

Reliability Test
The reliability test performed to determine the internal consistency of the measures used.
According to Sekaran (2003), the minimum acceptance criteria of reliability are the Cronbach’s Alpha
value should exceed 0.5 and high reliability is reflected from Cronbach’s Alpha above 0.8. The findings
of this study showed Cronbach’s Alpha value for the two variables were above 0.5. The Islamic banking
and muslim society variable have 0.643 value which is good. The results are reflected in the Table 1
below.

Reliability Statistics
Cronbach's
Alpha N of Items
.643 2

Data Analysis
We used Statistical Package for the Social Science (SPSS, Version 26.0) as tool to analyze our
data collected. We utilize the following statistic techniques in order to explain the relationship between
Organization culture and Employee Adaptability: descriptive statistics to analyze the respondent’s
opinion, Pearson’s correlation to analyze the relationship existence. A total of 100 feedbacks were
obtained. The collected responses were subjected to factor analysis, and followed by reliability analysis
before proceeding to regression analysis.

Findings and Analysis

Descriptive Statistics
Total 100 respondents and range of ib is 48 and ms is 52 while mean of ib is 30.0198 while ms is
38.2178 also the standard deviation of ib is 10.03990 and ms is 12.057886,the variance of ib is 100
while ms is 145.

N Range Minimum Maximum Mean Std. Deviation Variance

IB 101 48.00 16.00 64.00 30.0198 10.03990 100.800
MS 101 52.00 19.00 71.00 38.2178 12.05786 145.392
Valid N (listwise) 101
Demographic Analysis of the Respondents

A total of 100 employees responded for this study. The demographic profile of the respondents is
explained below and the summary of the information can be seen in the given table.

Age

Respondent’s age is factored in this survey to understand the age range of the employees’ and how they
adapt to the different organizational culture respectively. Respondents less than 25 years old consists of
94.1%, while the respondents between 26 and 35 years consist of 5.9%.

Gender
In respect to the gender, there were a total of 20 female and 80 male persons participated in this
study.

Religion
In respect to the religion 99 muslim and 1 christian are participated.

Demographics Characteristics %age

Under 25 94.1

AGE 26-35 5.9

Male 80.4

GENDER

Female 19.6
Correlation Analysis:
The correlation analysis is a statistical method used to observe all the existence of relationship
between independent variables and dependent variables (Sekaran, 2006). The analysis is performed to see
whether the two variables are perfectly relayed in a positive significant relationship, negative significant
relationship or no significant relationship between them. Below table shows that correlation value
(.830**) is significant and positive relationship between organizational culture and employee adaptability
at .00 level of significance level. So, there is a positive and significant relationship between
organizational culture and employee adaptability hypothesis accepted

Correlations
IB MS
IB Pearson Correlation 1 .830**
Sig. (2-tailed) .000
N 101 101
MS Pearson Correlation .830** 1
Sig. (2-tailed) .000
N 101 101
**. Correlation is significant at the 0.01 level (2-
tailed).

Statement of the Problem

This study specifically aimed to measure the effectiveness of the family members managing family-
owned businesses (MSEs) and how muslim society percept about Islamic banking and what they think
about islamic banking. The study sought to answer the following questions.
1. What is the perceived effectiveness of family-members in managing their business in terms of
participation, ownership control and family business interaction? 2.
Which among the following: participation, ownership control and family business interaction
significantly influence the level of effectiveness of family members in managing family-owned
businesses?
3. what are the point of view of Muslim society about the effectiveness of Islamic banks and is
the Islamic banks are according to shariah and what are their products and how they work.
Research Objectives

The primary objective of this study is to determine the effectiveness of family members in managing
family-owned businesses. This study aims to:
1. Determine the family members’ Participation, Ownership Control, Family Business
Interaction and their Effectiveness.
2. Determine which among the indicators significantly influence the
effectiveness of family members in managing family-owned businesses.
3. Determine how Islamic banking works and what they
offer and what is the future of Islamic banking according to our society.
Determine the roles of Islamic banking in our society.

Limitations

In designing this study, there were several factors which were known in advance that affected the
generalizability of results, including: (a) the location of respondents, (b) the type of respondents that
responded to the survey, (c) the limitation of only obtaining a single response from each business
enterprise, (d) the number of respondents, (e) the definition of family business for purposes of respondent
inclusion, and (f) the scales utilized. These limitations are further addressed below.

The generalizability of results is limited for several reasons. First, although surveying was random, it was
Pakistan. Second, targeted respondents were majority owners of family businesses. Although a primary
owner may have significant perspective on business operations and family dynamics, owners may have
their own biases. To minimize bias, ideally several perspectives should be obtained from each family
enterprise. Due to the limited data on business succession preparedness, a survey was developed and
utilized in order to collect original data. The largest challenge with creating a survey is ensuring that
respondents understand what is being asked and that questions are formatted in such a way that reliable
measures can result. The types of measurements utilized could have impacted the findings. In order to
increase the meaningfulness of responses, several previously validated scales were utilized based on their
prior use in family business research.

This outlines the researcher’s scope of place, time, respondents, etc. and the probable limitation that the
researchers identify with the research. The respondents of the study will be coming from the selected
MSEs family-owned business in pakistan. The study used a purposive sampling technique for it to target
the family members who are directly involved in managing their micro to small family-owned businesses
(MSEs) in pakistan. The age and gender of the respondents would be disregarded as long as they are
directly involved in managing their family-owned business. Only one or two respondents would be
coming from each chosen family business. We would know this through our questionnaires. The
interpretation written in this paper may not be true to the whole population as targeted, but instead may
only be true to all the respondents who actually participated in this study. The interpretations in this paper
should be taken with caution considering the data/variables used in multiple regression analysis are not
normally distributed.

CONCLUSION
Our study shows that Islamic banks have implemented corporate social responsibility initiatives in
accordance with Islamic teaching. Islamic banks implemented CSR based on government regulation and
ethics and based on Islamic law and values. Societies or the customers of the bank got benefits from
Islamic banks CSR program. The benefits include economic empowerment, family business capital
support, and zakat distribution. Future research should focus on how selective catalytic reduction
initiatives are maintained to sustain society's economic development.
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