Abstract:
The emergence of Islamic Financial Institutions (IFIs) is expected to provide enormous benefits for the Muslims
community in Indonesia such as the availability of IFIs based on Sharia law and the implementation of Islamic
value in the community. Like Corporate Social Responsibility (CSR) practices in all business organizations, the
IFI’s CSR becomes one of the important factors in improving organizational performance. The implementation of
CSR in IFIs is unique as it is based on Sharia law. Zakat and Qardh are the uniqueness of IFI’s CSR practices.
There are many studies which have investigated the relationship of Zakat and Qardh on organizational performance
in Arabic and Muslim countries. As Muslim countries, Islamic laws including providing Zakat and Qardh are
practices of every business organization. Indonesia is not a Muslim country, Zakat and Qardh are only required for
IFIs as part of CSR practices. This study aims to analyze the influence of CSR practices on the financial
performances of IFIs in Indonesia using gender as a control variable. The samples of this research were taken from
the annual reports of nine Islamic banks for the period of 2010-2014. Regression method was used to analyze and
test hypotheses. The results of this research indicate that the relationship between CSR practices and financial
performance is significant, the value of R is 0.737, and R square is 0.543. This means that the implementation of
CSR practices (Zakat and Qardh) improves organizational financial performances of IFIs in Indonesia. This study
also has a limitation as it only focuses on Zakat and Qardh; thus in the future, it is necessary to advance the variable
of CSR practices on the real social and environmental practices such as environmental improvement, increasing the
quality of human resources, involving in any jobs or reducing unemployment and any other activities.