Do Islamic Principles moderate the Interaction between Human Resource Practices and Islamic Banking Performance in Pakistan?

The purpose of this research is to investigate the reflection of human resource (HR) practices on organizational performance by utilizing the Islamic principle as a moderating variable. The sample of the research roams around the Islamic banks of Karachi, Pakistan. The convenience sampling technique has been used to gather the responses of 242 employees working in Islamic banks. Whereas, structural equation modeling was used to study the data. The overall result of the study concluded that few human resource practices are correlated with organizational performance while sharing the positive relation such as performance appraisal system, employee involvement, and selection & recruitment. The moderating effect of the application of Islamic principles results showed that compensation and performance appraisal contribute towards overall improvement however, training & development, and selection & recruitment contribute towards the reduction of organizational performance due to the application of Islamic principles. The research suggests that the HR practices are crucial for the overall organization's success therefore, the mangers at Islamic banks must put extra effort into designing the selection process that best matches the requirement of the job. The relevant job information to employees will help them performing job duties according to the management’s expectations. Lastly but importantly, managers should follow the application of Islamic principles in providing monetary benefits to the employees as it will become a pure source of motivation and active participation from the employees.