Is Ethical Banking the Future? A Literature Review

Abstract

Banks are one of the main contributors of economic growth. Whilst carrying their role as a catalyst of economic growth, banks may cause indirect damage to the environment and neglect part of the society. In the process they evade themselves from the socio- environmental responsibilities. In search of sustainable development through banking requires a new form of banking. The alternative source of banking has emerged to address these issues of environmental and societal sustainability. The new criteria for a knowledgeable shareholder/customer planning for investments/relationships with a bank would be the objective of the bank for environmental and societal sustainability. Banks are moving from profit centered banking to socio-environment centered banking. The ultimate objective is to achieve not only economic gains but societal and environmental gains as well. Hence; a form of banking based on values emerged and are called Ethical Banks. These banks promote ethical and responsible behaviors among their stakeholders. Ethical Banks like any other conventional Bank engages in whole gamut of banking operations. It operates with more transparency. Ethical Banking has many sustainable criteria, Responsible Investments, Values based Banking, Financial Inclusion, Environmental Sustainability and Sustainable Economic Gains. Ethical Banking is gaining popularity especially among the western part of the world. As the world is heading towards sustainability, Ethical banking is the most suitable banking model for the future. The subject of Ethical Banking is new to this part of the world. Therefore, many researches on this subject were done in the western world. Very few researches are available in Asian context. The purpose of this paper is to examine whether Ethical banking would be the future of banking through a literature review. The study is a desk research in the form of a literature review based on literature published between 1989-2019. The significance of the study is to find out whether Ethical Banking could contribute to socio-environmentally sustainable growth as the future of banking. Based on the literature reviewed, it can be concluded that Ethical banking could be the future of Baking for a sustainable world.

Keywords: Ethical Banking, Value Based Banking, Financial Inclusion, Sustainable Development Environmental Sustainability