News In Focus
Banking forum seeks to devise ethical model
A vision for a new financial system is the aim of a gathering this week of senior figures from the worlds of ethical business, the church and academia.
Hosted by legal firm Tods Murray, the forum is seeking to construct models for a "systemically stable and prudent banking sector".
Meeting under the umbrella of the Tods Murray/Islamic Finance Council UK (IFC) ethical finance forum, the group is attempting to take the concepts of existing players in ethical finance such as Co-op Bank and Triodos, a stage further by bringing together Islamic and ethical banking.
Representatives of a range of public and private organisations including Scottish Widows Investment Partnership, the Church of Scotland and Glasgow City Council have been discussing new kinds of financial institution, inspired by shared values. While the ultimate question is what a new ethical banking system should and could look like, the experts' approach is steered towards the practical and has attracted interest from government, faith groups and the private sector.
Graham Burnside, head of Tods Murray’s banking and finance team, said: “Our meetings have been exploring models which have a socially focused view of lending. These draw on ideas of ‘impact investment’ and ‘limited purpose banking’ with the aim of providing consumers with total visibility and choice as well as a social return.
“Many people are already basing their financial decisions on moral considerations and we know that there is a growing appetite for ethical trading. Examples of this are seen in the increase in interest in the Fairtrade movement and the growth of ethically-based financial institutions such as Triodos. There is an expanding sector of society who will choose social over purely financial returns.
“But it also goes deeper as a more prudent and socially aware banking system could increase confidence, facilitate business amongst SMEs and enhance Scotland’s financial reputation.”
Omar Shaikh of the IFC added: "Our discussions have become even more pertinent against the backdrop of constitutional reform. Scotland’s monetary system in the case for and against independence is being hotly debated.
“We strongly believe the shared values between Islamic finance, the church and broader ethical banking could provide the bedrock to a more stable and prudent banking sector whatever the outcome of a referendum, and no less so were we to become an independent country. We would not want to be in a similar situation as Ireland trying to bail out our banks. IMF studies have shown how Islamic banks are more stable than conventional counterparts and we need to see what we can learn from this to mitigate systemic risk."