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1. Introduction
With the recent innovative technological advancement and access to updated information, consumers are today more informed, more aware and savvy in choosing the right brand with their desired features. The banking sector has also seen many changes, and the banking customer has a choice to choose any retail bank for its services. In this regard, the advent and growth of Islamic banking has been a very attractive feature for Muslim as well as non-Muslim customers. Where a Muslim customer would look into Shariah compliance when choosing an Islamic bank for its services, a non-Muslim customer prefers ethical banking as a main feature of any financial institution. This awareness of ethical banking has been a major decisive factor for many customers when choosing a bank for its services.
The aim of this research is to look into the ethical practices of a profit-driven financial institution that is currently adopting Islamic banking and whether it can actually be ethical from an Islamic perspective. Like any other religion, Islam wants its followers to be truthful and honest and to be compliant with its teachings and especially in a business transaction. The research explores the Islamic scholastic arguments on the concepts of Riba (interest) and Gharar (uncertainty) within the framework of ethics, and then attempts to align them with the practitioners’ point of view. It also takes a look at operations of Islamic banking and how the concept of ethics within its domain of operations is resonated.
Given the fact that Islam prohibits investing in certain activities that are considered Haram, namely, alcohol, gambling, weapons and pornography, this research aims to look at if financial institutions whose primary objective under normal circumstance is to make profit, can actually be ethical in terms of Islamic banking.
2. Ethical banking
The recent decade has seen an upsurge of ethical factors in business operation throughout the world (Nicholson, 1994). Degenaar (2005) asserts the increasingly integration of ethical management into operational strategies by businesses across the globe. Degenaar (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”. Carrasco (2006) observes the same but he also goes onto saying that organisations are also...