Is Ethical Banking an Alternative to Conventional banking: A Literature Review

Abstract

The Conventional Banking has so far being proved to be in adequate in providing solutions to socio-economic issues, as they have been focused more on increasing their share of wealth. This was proven with the outbreak of global financial crisis in 2007. Banks role as intermediary is to source and channel capital to, where the economic activity is. The instabilities and turbulences created by the traditional banks necessitated a transparent, socially and ethically responsible financial investment climate. Banks are losing its Values; there is a segment of society which is still excluded from banking. Banking too has contributed to the degradation of environment. Consumers are no longer motivated only by the returns they receive on their investments but also by the impact of banking business on sustainable development. Banks are also under scrutiny by Regulatory bodies and Governments for their unethical practices. Therefore it is necessary to judge banks not only on financial performance but also on its ability to maintain Ethical Values, Financial Inclusion and Responsible Behaviour, hence; a need arose for a new version of banking system which could address issues so far neglected by Conventional Banking. There were many banking systems that were emerging as alternative to Conventional Banking. Ethical Banking is one such system of alternative banking. Core competency of Ethical Banking is engage in ethical practices. Ethical Banking once developed could broad base the banking community. Although many researches have been carried out in the global scale for this subject, there haven’t been any researches conducted on this subject in Sri Lanka. This research paper fills this research gap. The purpose of this paper is to examine whether Ethical banking can be an alternative to conventional banking. Therefore this study is totally a desk research in the form of a literature review based on literature published between 1989 and 2015. The significance of the study is to identify Ethical Banking as an alternative to Conventional Banking