Editorial

Abstract

In the Name of Allah, Most Gracious, Most Merciful. In August 2020, the licence of an Islamic bank in the Indian Ocean island of Mauritius was revoked by the Central Bank for having failed to comply with certain requirements of local banking laws. The non-compliance issues related to capital adequacy, internal control systems, anti-money laundering and combatting the financing of terrorism and record-keeping obligations. This news might not have made headlines in the global Islamic banking industry, but it has certainly shattered the image that Islamic banking held among the population and has hindered the overall progress of an industry that has hardly taken off in the island.

This case is highlighted because bank failures are less talked about in the industry. When it comes to what one expects of an Islamic bank, generally the list is quite long: Sharīʿah compliance, quality of service, economic performance, technological advancement, and so on. In the literature, Islamic banks are called upon not only to show “financial performance” but also “social performance”. Using Carroll’s (1979) famous definition of corporate social responsibility (CSR), an Islamic bank – like any other firm – should be foremost profitable, efficient and viable (economic responsibility). It should obey laws and regulations (legal responsibility), embrace Islamic and ethical norms (ethical responsibility) and assume social roles in the form of corporate philanthropy (discretionary responsibility). The futurist Brett King, who speaks about the future of banks, adds the responsibility of “going digital” for banks – including Islamic banks – to survive. In his book Bank 4.0: Banking Everywhere, Never at a Bank, he foresees a bank in 2050 to be one that leverages on leading-edge technology such as blockchain, artificial intelligence and voice-based smart assistants to embed banking within customers’ daily spending and money decisions. He foretells: “The coming Bank 4.0 era is one where either your bank is embedded in your world via tech, or it no longer exists.”