With the growing “awareness of ethical banking” there has been more of an emphasis on having a bank with ethical standards when choosing a bank (Gilani, 2015). “In the Islamic world, ethical standards have already been placed on financial systems and these standards tend to align with the standards of ethical banking” (Gilani, 2015).
Ethical banking “works based on equity, responsibility, accountability and promotion of sustainable development” and it “asserts integrity, responsibility and affinity” (Gilani, 2015).
“The growth of ethical banking is believed to have given a boost to Islamic banking” (Gilani, 2015). Islamic banking has “become development institutions, and thereby play an important role in the economic and moral uplift of the Islamic society or community aligning it within the
Shariah framework” (Gilani, 2015).
Both forms of banking seek to sustainably and ethically develop the communities they are serving and this connection allows both forms of banking to draw from each other.
For example, in Islam, the consumption of interest is not allowed for the reason that people who “borrow money in times of hardship [are] taken advantage of by charging a high interest” as “interest acts as component which systematically transfers money from people who
have less money to people who have more. It is seen as capitalist tool for exploiting the
needy and benefiting the rich. This is a major hurdle for social inequity which is not
present in Islamic banking. This view is further supported by the Quran and goes on to
say: O you who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to God, that ye may be successful (Quran 3: 130). It is not only the Quran that bans Usury as a holy book even the Holy Bible bans usury: Thou shall not lend upon usury to thy brother, usury of money, usury of victuals, usury of anything that is lent upon usury (Deuteronomy 23:19)” (Gilani, 2015).
“Banking policies, procedures, product mix, practices, attitudes of bankers and their intentions must target enriching poor in the society by lending them for initiating small businesses to ensure real spirit of Islamic financial system” (Gilani, 2015).
The standards set by Islam regarding finance are focused on societal financial development within individual personal finances. This balance parallels the ideologies of ethical banks. The question arises of whether or not these principles can be used as inspiration and implemented in conventional banks when thinking about how to design better experiences and societal change within banks and other financial institutions.
References:
Gilani, H. (2015). Exploring the ethical aspects of Islamic banking. International Journal of Islamic and Middle Eastern Finance and Management, 8(1), 85-98. https://doi.org/10.1108/IMEFM-09-2012-0087
