T AKAFUL OPERATORS’ CORPORATE SOCIAL PERFORMANCE (CSP): AN INDUSTRY PERSPECTIVE

Takaful operators which are part of Islamic financial institutions (IFIs) derive their fundamental principles from shariah . These religious based institutions are expected to fulfill the two important roles in their business operations: commercially profitable and socially responsible. Nevertheless, their societal role is rarely measured and discussed. Therefore, this study appraised the societal role of takaful operators by assessing the components which have been proposed under the corporate social performance (CSP) theme for IFIs. This study has arranged structured interview sessions with the Chief Investment Officers and Heads of Investment of each of the eleven takaful operators in Malaysia. The Delphi-style technique was adopted when developing the interview questions. The questions were developed in the form of a five-point Likert scale, addressing specific issues on CSP of takaful operators. In addition, information on takaful operators’ CSR activities, zakat and tax payment were gathered from the companies’ websites and annual report of takaful operators. The study concludes that takaful operators in Malaysia have achieved their societal role through two channels: CSP programmes financed from companies’ profits and fulfillment of CSP as a result of business-community agenda. This study covers every takaful operator in Malaysia and the results reflect industry opinion.


INTRODUCTION
Takaful embraced the concepts of mutual assistance and brotherhood by bearing each other risk in the event of calamity (Gönülal 2012;Siddiqui & Hunt-Ahmed 2013). Over the years, the scheme which was started as community based initiative is now seen as a lucrative business sector, as part of the Islamic finance industry. The takaful sector is expected to achieve USD 20 billion in term of gross contribution by 2017 (The World Takaful Report 2014). In Malaysia, the sector is forecasted to achieve nearly USD 5 billion in 2016 (Malaysian Takaful Association 2014).
Takaful operators which are part of Islamic financial institutions (IFIs), derive their fundamental principles from shariah. These religious based institutions are expected to fulfil the two important roles in their business operations by being commercially profitable and socially responsible.
This research argues that for contribution towards the society, such performance is categorized as corporate social performance (CSP) of takaful operators which is received limited attention

Takaful Operators in Malaysia
First takaful operator in Malaysia was established in 1984, and since then, the industry has gone through rapid development by having 12 takaful operators operating side by side the conventional insurance companies. The numbers then dropped to 11 takaful operators when merger and acquisition (M&A) process took place between AIA and ING operations in Malaysia (ING Website 2012). Takaful operators are not only competing amongst themselves for the same market, but also neck-to-neck with conventional insurance companies in a dual financial system landscape. This situation caused stiff competition amongst the market players; however it promotes better services and products for the customers. There are five basic takaful models in the world, which are ta'awuni (cooperation), mudharabah (profit sharing), wakalah (agency), waqf (endowment) and hybrid. Each model has its own features and limitations. In Malaysia, the wakalah model is adopted by every takaful operator which have been customized to meet specific needs of takaful operators' products (Htay & Zaharin 2012

Takaful operators' corporate social performance (CSP)
Much has been debated on the periphery of corporate social performance (CSP) in the Western literature and such positive vibes transmitted to the Islamic business. Accordingly, takaful companies which derived their philosophical foundation from Islam should behave parallel with the religion's teaching (Asutay 2008;Dar 2012). Islam views the use of profit for society's needs is preferable compared to individual consumption (Siddiqi 1981;Metwally 1997). It even has higher priority than the state (Cantori & Lowrie 1992). In this particular context, firms have to be aware that their achievements are not measured alone in term of financial performance; rather the greatest achievement is when the firms can use their profits for the betterment of the society. Raghib (1995) suggests that profit is closely associated with business performance; but it should not be the only factor that firms consider since there are other responsibilities which firms need to reflect. This consistent with Ibn Khaldun comments that "…economic endeavour must generate income to market actors and enable and motivate them to serve their community," cited in Ali, Al-Aali and Al-Owaihan (2012).
Most of the literature discuss CSP within the periphery of corporate social responsibility (CSR) practiced by the companies. This assumption is partially accurate as Frederick (1994) emphasises that CSP is beyond that; and CSR is part and parcel of the CSP broad agenda. He suggested three steps which need to be fulfilled before the company can be regarded as achieving its CSP: CSR1; CSR2; and CSR3. Sairally (2013) describes CSR3 as the companies' CSP which eventually achieved after formulating the strategies and plans in CSR1, and implementing the ideas which described as CSR2. Carroll (1979) concisely describes CSR1 as the companies tasks to realize their duties: legal, ethical, economic and discretionary responsibilities. There are four components under CSR1 which are legal, ethical, economic and discretionary responsibilities as suggested by Carroll (1979). Companies have to plan for strategies and programs under each theme before they can implement them in the next level, CSR2. This specific components help to bring focus on the wide concept of CSR which Frederick (1994) describes as the implementable and measurable tasks.
The economic responsibilities deemed as the basic or first layer requirement of companies as business entities which required to provide goods and services needed by the society and expected to be profitable at the end of the process. Every other business roles are assigned to this function. The next function is legal responsibilities regarded as the framework which the society expected the companies to be operated by adhering to the rules and regulations imposed on them. After that is ethical responsibilities which described as the extension of the early two responsibilities (economic and legal) which are actually expected to be exercised ethically; however the difference under this precept is the society expects the companies to be ethically responsible beyond the prescribed ethics in the early two responsibilities. Lastly, the discretionary responsibilities, which are ethical actions that above the ethical responsibilities. This is exercised by the companies voluntarily, which even the society does not expect the companies to fulfil this. Carroll (1979: 500) gives instances on companies' contributions on this aspect such as day care for the working mothers and training for the unemployed people.
In term of CSR2 which Frederick (1994) describes it as corporate social responsiveness, dubbed as the managerial responds towards the precepts laid down in CSR1 and how the companies respond to the society demands over this issue. Thus, management implementation of CSR2 will produce CSR3 or CSP, the outcomes or results from the implementation of activities in CSR1 and CSR2 which give opportunity for measuring the success of overall firms' CSR based on the empirical available data.
The benefits of CSP are not only received by the targeted groups in the CSR programmes, moreover, it brings benefits to the companies which have proper implementation of CSR programmes in form positive financial performance for firms that invest in CSR activities as suggested by Bushee (2001). This relationship somewhat virtuous cycle, as described by Dean (1998) due to the situation either financial performance influenced by CSR activities or CSR activities influenced by firms' good financial performance. Nelling and Webb (2009) concur with relationship between CSR and financial performance, but they caution such relationship becomes weaker with the use of fixed effects Granger test. Recent study on CSP by Gregory et. al. (2016) suggest that CSP influences positively the firm's value, earnings persistence and acts as competitive edge. Their study were based on the 44 industries in the United Kingdom. Nevertheless, the unanswered question is how much should be spent or contributes for CSR programmes in order for the company to be seen as achieving their CSP is remained puzzled (Dean 1998). Sairally (2013) posits the suggested CSP components to be used when assessing the CSP of IFIs, as laid down by Carroll (1979): legal, ethical, economic and discretionary responsibilities.
Therefore, by exercising these four responsibilities, it signifies the fulfilment of CSR1 and CSR2 conditions. Thus, from these four required responsibilities, it can be postulated that takaful operators seemed have acted as responsible corporate citizen which utilize various sources and consistently looking for avenues in order to contribute towards the society. If this really materializes in practise -takaful operators have conformed to the IFIs' societal objective.

RESEARCH METHOD
This study has arranged structured interview sessions with the Chief Investment Officers and Heads of Investment of each of the eleven takaful operators in Malaysia. The Delphi-style technique was adopted when developing the interview questions -by gathering a panel of experts' opinions on the questions' draft. This is to ensure that the questions and scope of the study are relevant and capable of providing meaningful information for this research. The questions were developed in the form of a five-point Likert scale, addressing specific issues on CSP of takaful operators. In addition, information on takaful operators' CSR activities, zakat and tax payment were gathered from the companies' websites and annual report of takaful operators.

FINDINGS1 F †
Findings gathered from the structured interviews indicate that takaful operators measure their corporate social performance in two ways: zakat payment and CSR activities. Interestingly, the interviewees did not mention or consider the way their businesses being managed as part and parcel of their CSP. This is partly accurate since CSP for takaful operators is actually beyond zakat and charitable works. This situation substantiated Lu and Castka (2009)  In the other end of the spectrum, the raison d'etre of the company can categorized as one of the items for the company's CSP. This is particularly important for institutions like takaful operators which regarded as religiously and commercially driven business entities. Therefore, they have to simultaneously serve these two needs without isolation to any of the objectives (Asutay 2008;Dar 2012). Thus, the presence of takaful operators in Malaysia for offering Shariah compliant insurance products and services are part of the companies' CSP -providing services required by the society -to satisfy commercial and religious needs. Previous literatures suggest that the CSP of IFIs can be summarized in two categories: business activities with society related agenda2 F ‡ and actions purposely taken to fulfil the CSR activities. These two broad categories were explored in this study by having questions on how investment activities and the business model of takaful operator possibly help to achieve the societal objectives, as exhibited in the interview's five Likert-scale questions. As discussed earlier, Carroll (1979) breaks down the two categories into four components of CSP which a corporation expected to realize: economic; legal; ethical; and discretionary responsibilities. From the open-ended interview questions on CSR, the interviewees (as clarified earlier) mentioned that their takaful operators involved in various CSR activities for the community and every year they contribute for zakat payment. The CSR activities financed either from zakat's fund or from companies' dedicated budget for such programs. In addition for zakat, the payment either been made to the state Islamic council or they distribute them directly to the eight groups (asnaf) which qualified to receive zakat as mentioned in Holy Quran, with advised from their takaful operator's Shariah advisory committee.
The delicate part is to measure how much is actually being spent or allocated for social programs yearly in order to assess the takaful operators' CSP. Most of the interviewees hardly able to brief (even rough estimation) agreeable percentages; except that citing zakat's amount (2.5% from the prescribed zakat formula3 F § ) as their bases. Likewise, zakat is only imposed to the shareholders' fund since the paid-up capital provided by them, if there is surplus (Abdullah et al. 2012). A simple comparison between takaful operators and conventional insurers will signify that in term of contribution to the nation in forms of taxes -takaful operator contributes more due to zakat payment (pseudo religious tax) and corporate tax compared to conventional insurers, albeit in term of amount the latter might contribute more. Likewise, it signifies that takaful operators have fulfilled the first CSR component: legal responsibility.
In another perspective, one may argue that zakat is a kind of compulsory religious tax in Islam and if there is any CSR tax impose on the conventional insurer; then the same situation will exist. Nonetheless, it is important to evoke the sacred philosophy and principles of Islamic financial institution in order to understand why such religious tax is imposed on takaful operators. Table  6(a) displays the yearly zakat contributions, tax payments and gross profits for five years, from 2010-2014. Prior to 2012, takaful operators prepared their financial statements according to the funds managed, which are: shareholders; family; and general funds. Accordingly, zakat and tax payment have contributed as low as MYR 100k to MYR 70 million to the country respectively; without coalescing specific CSR projects organized by the firms as displayed in Table 6(b). Tax is essential for every government in the world in order to run a country effectively for the citizen. Freedman (2003) emphasises that under CSR requirement, companies are expected to pay their tax to the government to show them good corporate citizen.
General Takaful

Table 6(a): Takaful Operators' Gross Profit, Zakat Contributions and Tax Payments
Move on to the next component which is ethical responsibility as suggested by Carroll (1979), it is appropriate to denote that takaful operators in Malaysia involved in various CSR activities voluntarily and their charity works were noticeable especially during Ramadhan (the fasting month) due to religious sentiment on that holy month. The number of CSR activities of takaful operators in Malaysia are displayed in Table 6(b) based on the information gathered from the companies' websites from 2010 -2014. However, total money spent for the activities are not available except for TO11 Berhad -the company spent nearly MYR 1 million every year for CSR activities. For the rest of takaful operators, some only listing their CSR projects, but nearly half of them did not inform any CSR activities in their websites and annual reports. TO2 Berhad n/a n/a n/a n/a 4 TO3 Berhad 1 n/a n/a n/a n/a TO4 Berhad n/a n/a n/a n/a n/a TO5 Berhad n/a n/a n/a n/a 1 TO6 Berhad n/a n/a n/a n/a n/a TO10 Berhad n/a n/a n/a n/a n/a  The next component is economic responsibility which previous studies have covered in-depth on this in form financial performance based on the efficiency management of cost, structural form and technological effect (Saad et al. 2006;Kader, Adams & Hardwick 2010;Ismail, Alhabshi & Bacha 2011;Saad & Idris 2011). In other words, each year takaful operators have performed this responsibility well by achieving business growths and profits for their principals: shareholders and takaful contributors, as shown in Table 6(a). The last component is discretionary responsibility (Carroll 1979), which defined by Gitman and McDaniel (2008) as the endeavour took by the firms to fulfil the early three components (legal, economic and ethical responsibilities) and move to the highest level of philanthropy by ensuring the company's business model and its activities meet able to serve the society. This part may sound utopia or difficult to achieve. However, looking back at the early three responsibilities under CSR, takaful operators can be regarded have achieved and fulfilled them. Thus, for discretionary responsibility, arguably takaful operators have managed to achieve it. Even though philanthropically, the waqf (endowment) model looks preferable since it has the capacity to reach and deliver better social services, but the currently adopted wakalah version of takaful model also capable to fulfil its social obligation within its spectrum. It is noteworthy to mention that while waqf model established solely for charitable, in the other side, wakalah model shows how commercial features enjoined with social obligations able to serve both needs: profit and social welfare.
It is understandable that there are groups of people who critics and claims that such social performance is not sufficient for Islamic financial institution. The criticisms normally address to the Islamic banks. As for the takaful operators, although they share some similarities with the Islamic banks, however in term of operational wise they are different. All things considered, it is convenient to remark that takaful operators have fulfilled their CSR1 and CSR2. However, the CSR3 component is hardly measured empirically in this study as it requires longer time frame and more active involvement from takaful operators in order to track their CSR activities and deriving the positive outcomes resulted from such activities. Nevertheless, it is appropriate to denote in general such activities have given benefits to the receivers based on the information and news retrieved from newspapers and companies' websites in relations to their CSR activities, also from the local Islamic councils that manage zakat fund.

CONCLUSION
Takaful operators have achieved their CSP within the limited features of wakalah takaful model. This aspect can be derived from the findings presented in Table 6(a) on zakat contributions and tax payment, and Table 6(b) on the number of CSR activities and budget spent for the programs. The figures displayed indicate that takaful operators' CSP is a "profit driven social programs." In other words, the profits derived from the business were used to conduct social programs in forms of zakat contributions, tax payment and CSR activities. Nevertheless, this only represents part of the broad social responsible aspect which the companies have done. Another important aspect which is rarely considered and mentioned under the takaful operators' social responsible theme is their raison d'etre or business agenda. It should be emphasised that takaful operators were established to continue the classical notion of takaful4 F ** operation; but in a different setting, as a result of the needs to embrace modern corporation concept. Nevertheless, the main purpose is remained similar which is to offer alternative to the Muslims to be able to utilize insurance services which comply with Shariah (Husin & Rahman 2013;Souiden & Jabeur 2015), and to eliminate financial exclusion due to religious constraint (Coolen-Maturi 2013). This noble objective is stipulated in the white paper of steering committee comprising 20 experts in the field which was formed by the Malaysian government to study the feasibility of Islamic finance in Malaysia in 1981 (Laldin 2008).
Therefore, from the discussion above, this study views that it has managed to assess takaful operators' corporate social performance (CSP) from four angles as suggested in previous literature: economic; legal; ethical; and discretionary responsibilities. Moreover, takaful operators have fulfilled expectations bestowed upon them as Islamic financial institutions (IFIs) by delivering their CSP well and attaining profit every year -socially responsible and financially profitable.