Linking governance qualities and stewardship attributes: findings from Malaysiantakafuloperators

Purpose - As custodians oftakafulcontributors’tabarru’(donation) funds,takafuloperators are expected to fulfil a stewardship role propagated under the precepts of Islam. The purpose of this paper is to analysetakafuloperators’ stewardship, focusing on investment practices. Design/methodology/approach - Structured interviews were conducted with senior investment staff from all of Malaysia’stakafuloperators. Questions, developed using Delphi-style techniques, allowed a five-point Likert scale response addressing specific issues revolving around seven dimensions of governance quality – using the Malaysian Rating Corporation’s (MARC’s) governance rating guidelines for Islamic financial institutions (IFIs). Interviewees’ responses were assigned composite scores. Findings - Malaysia’stakafuloperators score well on most prescribed governance quality dimensions, although performance varies between operators and across dimensions. Areas for improvement are identified, especially regarding disclosure of information and contributor involvement intakafuloperators’ management. Research limitations/implications - Predetermined questions restrict flexibility in obtainingtakafuloperators’ information; however, end-of-interview, open-ended questions were asked to tap interviewee opinions on pertinent issues. A focus ontakafuloperators’ governance quality and stewardship of investments means findings may not be representative of all operational aspects of their businesses. Practical implications - This study identifies governance quality guidelines whichtakafuloperators may benchmark against and identifies where best to focus attempts to improve performance. These guidelines will also assist regulators assessingtakafuloperators’ stewardship performance. Originality/value - This study uses governance quality as an indicator of stewardship, a concept aligned with the precepts ofShariah. It covers the opinion of thetakafulindustry in a country with a comprehensive Islamic financial system, Malaysia, extending understanding oftakafuloperators’ governance quality.