Real Ethical (Islamic) ‘Banking’

Posted: July 5, 2013 in Islamic Finance, Monetary System, Poverty
Tags: , , , , ,

I was intrigued to learn about a community bank set up in the last year by David Fishwick, in the North of England.

It is worth viewing a recent documentary about his venture;

http://www.channel4.com/programmes/bank-of-dave

This alternative is not a new concept

This was in fact the traditional means of banking, long before Thatcher’s Big Bang and the wave of deregulation (and re-regulation) that gave us what we now know as banking

I was similarly intrigued to learn about a Nobel Prize winning Muslim economist, Muhammad Yunus, who previously also laid an alternative blue print for ethical finance/banking;

His venture’s website can be found here which explains more about its function;

http://www.grameen.com/

This venture seeks explicitly to provide finance to the poor in order to give them a hand up out of their circumstances.

I have also heard of other community based banking models which have thrived on local levels across different regions of the world.

It is refreshing to know that these alternatives are alive and functioning well. They can be adapted more to take more Islamic notions of interest free based financing further. It should be noted that these small scale models do however present a big risk of failure – but is this perhaps the very notion of risk sharing and pure profit/loss that we find in the fiqh?

It raises a serious question to those practitioners of contemporary Islamic banking and finance which are re-worded models of conventional interest bearing transactions; why have these institutions not sought to break away from these conventional ribanomic templates and move to a real value changing proposition which takes away the profit motive and seeks to align financing with genuine needs and transmission services rather than high volume, big inflation adjusted profit based incentives trying to keep up with the investment banking giants of this world.

The major hurdle we must overcome when it comes to business, is the profit motive. If we seek to start a venture not for what it can achieve for society, but more for what material advancements it can yield for ourselves, then the whole premiss can never be akin to anything taught within Islam.

The oft quoted verse in The Qur’an 2:275 regarding the permission of ‘trade’ bayan and the prohibition of riba has been used as a blanket application justifying a wide range of superficial activity of which the essence and principle differ considerably to the holistic teachings in Islam of ethics, (real) value, honesty and compatibility with the environment. We are only likely to repeat the scandals and failures of the institutions we seek to mimic.

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