Abstract
Islamic banking has become the fastest growing sector in the financial markets of the world in the past three decades, and this growth trajectory has coincided with the world’s renewed interest in the ideas of ethical banking. This raises the question regarding the actual nature of the relationship between ethical and Islamic banking systems, and the analysis in the current paper intends to provide answers to this question. The analysis has shown that the practices of Islamic banking system fit into ethical banking framework to a greater extent. It concludes that Islamic banking forms part of the broad ethical banking brand, and thus its rapid growth at the time when the ethical banking movement gathers new momentum could not be a matter of sheer coincidence.The paper also examines three business management implications of its findings. One implication is that proper name selection is an important aspect of successful branding and marketing of products or services; and the second is that we are in the age of committed consumption whereby principles, ethics and image are issues of importance in people’s choice of brands. The third implication is that market niching business strategies could bring success if properly designed and executed.
Highlights
Since early 1990s, questions of ethics have risen to near the top of the agenda of business issues in most parts of the world (Nicholson, 1994). Degenaar (2005) observes that increasingly more businesses are integrating ethics into their strategies, and some are seeking different modus operandi grounded in ethics
The decision-making process in Islamic banking system focuses on serving the interests of stakeholders as opposed to serving the interests of shareholders only; and while conventional banking is elitist, Islamic banking provides opportunities for participation in economic activities to a wider spectrum of society and to those that crave for making investment in worthy causes
It is justifiable to state that this paper has found that Islamic banking satisfies 75% of the conditions for ethical banking
Summary
Since early 1990s, questions of ethics have risen to near the top of the agenda of business issues in most parts of the world (Nicholson, 1994). Degenaar (2005) observes that increasingly more businesses are integrating ethics into their strategies, and some are seeking different modus operandi grounded in ethics. Denegaar (2005) further contends that these trends can be witnessed even in the banking sector, which has seen the evolution and spread of a new system called “ethical banking” The latter is portrayed as a socially- and environmentally-sensitive alternative to conventional banking. Zaher and Hassan (2001) explain that currently Islamic banking is making waves in all corners of the world; from Malaysia, through the Middle East and Africa, to Europe and the Americas. Most researchers including Dhumale and Sapcanin (2006), Lewison (1999), and Scott (2007) are of the view that Islamic banking rides on the crest of the world’s renewed interest in the ideas of ethical banking. The paper examines the business management implications of the findings of the analysis on the foregoing question
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