Ethical Versus Conventional Banking: A Case Study

Embedding Value-Based Principles in the Culture of Islamic Banks to Enhance Their Sustainability, Resilience, and Social Impact

Value-based banks strive to build a self-sustaining banking model with inclusive and transparent governance that is sustainable and resilient to external disturbances. Initiatives for value-based intermediation in Islamic finance started in Malaysia. The growth in VBIBs is accompanied by claims about its relative resilience to crisis and efficiency compared to VBBs and conventional banks. However, little empirical evidence is available to support such claims. This study aims to analyze the resilience and efficiency of VBIBs compared to the VBBs and GSIBs. It highlights the role of value-based strategy in developing a sound and resilient Islamic banking system to overcome future crises and further strengthen the impacts of Islamic banks. The study used quantitative and content analysis research methods, with data collected from the annual reports of 10 VBIBs from 2017 to 2020. The empirical results show that VBIBs have better risk-adjusted capital levels and asset quality, enabling them to be more resilient during crises. They provide more satisfactory returns compared to the VBBs and GSIBs. However, VBBs have a better asset structure and growth rate, which contributes to the real economy. The overall findings suggest that adopting value-based strategies in Islamic banking improve banks’ sustainability, resilience, and social impacts by concentrating resources on value-based activities that provide economic resiliency and enhance inclusive and sustainable economic growth. The study fills gaps in the current Islamic finance literature concerning empirical studies on value-based Islamic banking. It also helps practitioners to understand the relative efficiency, resilience, and social impact of VBIBs.

The Dispensable Surplus Dairy Calf: Is This Issue a "Wicked Problem" and Where Do We Go From Here?

Surplus dairy calves consist of all dairy bull calves and any heifer calves not needed as replacements for the milking herd. The fate of these surplus calves varies by region; for example, in Australia and New Zealand they are often sold as "bobby" calves and slaughtered within the first weeks of life; whereas, in North America they are normally sold within the first weeks of life but reared for 16-18 weeks as veal or longer as dairy beef. Regardless of region, demand for these calves is often very low, driving down prices and in some cases leaving farmers with no alternative options other than on-farm euthanasia. The notion that dairy cows must give birth to produce milk and that the calves are immediately separated from the dam, many of which will end up immediately being sold as surplus calves, has become a topic of public concern. These concerns have increased given the growing number of pictures and stories in the media of on-farm euthanasia, dairy calves being transported at very young ages and frequently receiving sub-standard levels of care. In this paper we describe the status quo of this complex, value-laden issue that without transformative change is at great risk for continued criticism from the public. Moreover, despite many attempts at refinement of the existing approach (i.e., the pursuit of technical improvements), little has changed in terms of how these surplus dairy calves are managed and so we predict that on its own, this approach will likely fail in the long run. We then set out how the current surplus calf management practices could be viewed to fit the definition of a "wicked problem." We conclude by calling for new research using participatory methodologies that include the voice of all stakeholders including the public, as a first step in identifying sustainable solutions that resonate with both society and the livestock industry. We briefly discuss three participatory methodologies that have successfully been used to develop sustainable solutions for other complex problems. Adoption of these types of methodologies has the potential to help position the dairy industry as a leader in sustainable food production.

Corporate Sustainability in Bangladeshi Banks: Proactive or Reactive Ethical Behavior?

The purpose of this study is to analyze the connection between the sustainability performance and financial performance of Bangladeshi banks to explore the impact of the Bangladesh Environmental Risk Management Guideline. We analyzed all 56 scheduled commercial banks that are currently operating in Bangladesh under the guidelines of the Central Bank of Bangladesh. Data for the sample has been collected from publicly available reports such as annual, sustainability, and corporate social responsibility (CSR) reports, disclosed sustainability and financial information on the banks’ websites, including all bank branches, and data published from the Central Bank. Data has been analyzed using panel regression. Our results indicate that higher sustainability performance creates a higher financial performance, and that bigger banks perform better with regard to sustainability than smaller banks. The analysis did not find, however, that higher financial performance influences the sustainability performance of the banks positively. Consequently, this research contributes to the research on legitimacy-driven behavior of Bangladeshi banks. This behavior rather leads to a reactive adoption of sustainability activities instead of proactive behavior.

The Determinants of Cooperative Banks’ Community Service—Empirical Study from Poland

This research concentrated on the socio-financial qualities of Poland’s co-op banking. The study’s results enabled answering the question of whether the cooperative banks (co-op banks) are exclusively focused on maximum financial effectiveness or faithful to the idea of cooperation, which basically means supporting its membership and community development. The main objective of the study was to determine the influence of internal factors on initiated support to the community within the framework defining the activities pertaining to a business’s social responsibility, as seen for Poland’s co-op banks. A seven-year study period was adopted, i.e., 2011–2017, inclusive. The research indicated that the co-op banks decide about a sum of contributions for community initiatives based on their current condition—according to current profits, current credits volume, total accounts number and considering financial security as expressed by the level of the solvency coefficient of the previous year.

Sustainable and conventional banking in Europe

At the end of the 20th century a new banking model, the so-called ethical banking, emerged becoming the maximum exponent of a socially responsible investment. The financial crisis in 2008 led to a distrust of the conventional financial system and consequently investors began to look with interest this new banking, which only invests in ethical activities and products, with social and environmental criteria, total transparency and a democratic management. The aim of this article is to analyze the economic structure of ethical banking, compared to that of conventional banking, by paying attention to its liquidity, coverage and solvency. Specifically, We compare the financial statements of Triodos Bank, the main European ethical bank belonging to the Global Alliance for Banking on Values, with two of the main conventional banks of each of the five countries in Europe in which it operates. To do this, we apply a financial and economic analysis to the period from 2015 to 2018, the means difference test and analysis of variance on an array of financial ratios and, finally, probit regressions. The results reveal that ethical banking is growing more than conventional banking and it presents greater liquidity and solvency, although, in general terms, its profitability is not higher. In conclusion, both savers and investors have guarantees that their savings are invested not only in a responsible but also in a confident way in ethical banking.

Enhancing Bank Loyalty through Sustainable Banking Practices: The Mediating Effect of Corporate Image

As the demand for a more sustainable society increases, adopting a sustainable banking approach serves as a competitive advantage for banks that are focused on attaining bank loyalty. This study revolves around understanding the role of sustainable banking practices in bank loyalty while exploring the mediating effect of corporate image on the relationship between sustainable banking practices and bank loyalty. For this study, 511 questionnaires derived from customers of the banking sector were adopted. Results from structural equation modeling showed that sustainable banking practices positively and directly affected bank loyalty and corporate image, corporate image directly and positively affected bank loyalty, and corporate image also mediated the relationship between sustainable banking practices and bank loyalty.