Integrating value-based intermediation into business models: a proposed guideline for Islamic banks

The value-based intermediation (VBI) has been recently announced by the Central Bank of Malaysia (Bank Negara) as a vital driver in expanding the responsibilities and influence of Islamic finance in the future. It aims to reinforce the foundations of Islamic finance in social justice and advocate a value-based economy via increased integrity, inclusivity, and sustainable growth. This chapter analyses the current practices of VBI information for Islamic banks operating in Malaysia. Also, it proposes a guideline to communicate VBI information to stakeholders through the bank's business model as the core of integrated reporting (IR). Using a sample of all the 16 Islamic banks operating in Malaysia, content analysis was employed to collect data over a four-year period from 2017 to 2020. The results revealed that the adoption of IR and VBI has seen considerable interest among the research sample. Approximately 82% of all banks in our selection have embedded the VBI information in the recent annual reports of 2020. More than half (7 out of 13) of VBI adopter banks have applied IR to draw and communicate the VBI information to stakeholders. Additionally, the IR framework and business models represent the best strategic tools banks could utilize to provide the VBI progress in a holistic, concise, and useful manner compared to traditional reporting practices. This chapter contributes to the Islamic finance literature by offering vital perceptions to banks' management, analysts, shareholders, and policymakers on the importance of the VBI information disclosures and how to deliver it using the business models.