Relationship between ethical and Islamic banking systems and its business management implications

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.

The Role of Business Ethics in the Relationship between Market Orientation and Business performance

“…The scholars in Islamic banking have actually warned about this phenomenon, e.g. Wilson (2005) and Saidi (2009) who have argued that Islamic banks should rely on the unique quality of the services and products rather than pricing to win the competition against conventional banks.…”

“…Sources: Adapted from Rahman (2007) In the precedent studies, the scholars have developed the construct of Islamic business ethics, using different viewpoints, such as from the view of Islamic bank or financial institution (e.g. Saidi, 2009;Gait & Worthington, 2007;Nasution, 2009;Adebayo & Hassan, 2009), from marketing view (Saeed et al, 2001;Ali, 2011), from general management point of view (Rice 1999;Muhammad et al 2008; Is'haq 2012) and from leadership (Arslan, 2008;Abeng, 1997).…”

Radical business ethics: a critical and postmetaphysical manifesto

“…Compare a recent article on the relationship between Islamic banking and ethical banking (Saidi ). In this article, Saidi (: 43) provides evidence of the recent financial success of so‐called ‘Islamic banking’, making it a ‘major competitor to conventional banking’ and a model worthy of emulation.…”

“…Compare a recent article on the relationship between Islamic banking and ethical banking (Saidi ). In this article, Saidi (: 43) provides evidence of the recent financial success of so‐called ‘Islamic banking’, making it a ‘major competitor to conventional banking’ and a model worthy of emulation. The model provided by Islamic banking represents a significant alternative to business as usual – its emphasis on sustainability (financial and social), its prioritising of the welfare of society and the environment, its focus on needs rather than demand , and its stakeholder approach make it a hopeful form of organisational difference.…”

“…Yet the purpose of the article is not the facilitation of radical otherness, but rather the strategic taming of difference. Accordingly, on the basis of its business success, Saidi (: 47) states that it is ‘no wonder that established banking giants are learning from Islamic banking on the trick of growing and maintaining their market share’. This strategic taming culminates in Saidi's (: 49) suggestion that descriptive names such as ‘Ethical Banking’ or ‘Interest‐Free Banking’ replace the proper name ‘Islamic banking’ for branding purposes.…”