Professor Rodney Wilson, Centre for Middle Eastern and Islamic Studies, University of Durham

Islamic banks often describe themselves as being providers of ethical financial services, but they do not spell out explicitly what is meant by this or its significance. The word ethical is used as a label, and equated with Islamic, but there is no attempt to make the link between what is ethical and the specific methods of conducting financial transactions. This is unfortunate, as if Islamic banks are to build their customer bases, then they have to be convincing and persuade potential clients that there are worth switching to. For Islamic banks it not so much a matter of competing on price, but rather in stressing the unique quality of the services they provide. This means they have to be believable, and be able to engage the customer by appealing to his or her conscience. Quite rightly the major concern of Islamic banks is that their financial practices should comply with the shariah law. Having a shariah advisor or committee of respected fiqh scholars who can endorse the bank’s activities is seen as crucial to ensure the institution’s reputation. In their publicity material however the emphasis by the banks is often on the standing of their shariah regulators rather than stressing the moral teaching that governs Islamic finance. There is little attempt to explain the ethical merits of how the bank conducts its business directly to the clients. Islamic banks can and do primarily attract clients because of their religious beliefs, and their desire to translate these into everyday financial dealings. Merely stating that a product is shariah compliant is insufficient however; Islamic banks need to be more closely 1 engaged with their clients and make a convincing moral argument for their business methods. As the requirements and aspirations of societies change there is a need to appeal to the intelligence as well as the beliefs of the client. Islamic banks must convince their customers of the advantages of their innovative financial products, and demonstrate that the products are both shariah compliant and at the same time related to new business circumstances. There is in other words an education role for Islamic banks and other providers of Islamic financial services. This should not undermine shariah advisors by bypassing them, but rather enhance their role as they can help underline the merits of Islamic finance to a wider but well informed and demanding customer base. In Islamic terms this is a matter of ijtihad or application of fundamental principles to changing circumstances. The shariah advisors or committee should, in other words, be involved in marketing as well as regulation, and play a more pro-active rather than reactive role.


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