Performance and impact measurement of value-based intermediation implementation: a case study of Islamic financial institutions in Malaysia

This research examines the performance and impact measurement of Value-Based Intermediation (VBI) implementation by Islamic Financial Institutions (IFIs) in Malaysia. Since its introduction by Bank Negara Malaysia (BNM) in 2017, VBI has emerged as a strategic framework for banking beyond profit, emphasising sustainability and ethical practices aligned with Islamic principles. The study employs a case study approach, focusing primarily on Alpha Bank due to its advanced VBI implementation and membership in the Global Alliance for Banking on Values (GABV). Beta Bank contributed preliminary data during Phase 1. However, its limited knowledge, experience, and lack of a designated person in charge restricted its full participation, leading to only partial inclusion in the analysis. The study reveals that the current VBI Scorecard, used to measure the performance of IFIs, largely follows guidelines but does not adequately incorporate essential Islamic principles integral to VBI. To fill this gap, a VBI Impact Measurement (VBIIM) Model is proposed, which integrates financial, social, and environmental dimensions with Stakeholder Theory and Islamic principles. The practical application of the VBIIM model by Alpha Bank illustrates enhanced decision-making in ethical financing and community development initiatives. Based on these findings, the study recommends that BNM revise VBI measurement tools to include more comprehensive and multidimensional indicators. This would better support IFIs in aligning their practices with national sustainability objectives with Islamic elements measurement. While the research centres mainly on a single case, it delivers valuable insights that can inform future multi-case studies and contribute to the ongoing development of effective VBI measurement tools.