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Exploring the Ethical

banks in the Arabian Gulf region is because these countries share a similar socio-economic structure, which as such enables us to control for macro and cultural effects and make comparison and interpre- tations more meaningful. We chose corporate annual reports rather than other media of communication2 in assessing communicated ethical identity because they offer a snapshot of management’s mindset in a par- ticular period (Neimark, 1992), have greater poten- tial to influence due to widespread distribution (Adams and Harte, 1998), are more accessible for research purposes and are used by a number of stakeholders as the sole source of certain corporate information (Deegan and Rankin, 1997). The results of our survey, analysis and discussion constitute a further contribution to corporate identity, corporate communication, corporate social responsibility and Islamic banking literature.

The article proceeds as follows. The next section presents a literature review on various aspects of Islamic banking and discusses what constitutes the ideal ethical identity based on the Islamic precepts. The third section describes the research method. The fourth section presents our results and discus- sion, followed by the conclusions, implications and avenues for further research in the final section.

Review of literature

Islamic banking received substantial attention following the Islamic resurgence in the 1970s and the increasing concern regarding the relationship between religion and economic activities among Muslims. There are now more than 200 Islamic financial institutions operating in 23 countries with more than US$200 billion in deposits, and bankers estimate that the market is growing by at least 15% a year (International Herald Tribune, 2003). Despite growing acceptance of Islamic banking, there is still scepticism on the purity’ of the products offered and also the sincerity’ of those managing the institutions. Others mention that one of the basic problems with Islamic banking is that ‘‘Homo Islamicus [Islamic man] keeps acting a lot like Homo economicus [economic man] (Useem, 2005). On the one hand, Islamic banks are perceived as being too complacent, believing they have a captive market in the Muslim masses who will come to them on religious grounds

Identity of Islamic Banks


alone, and in the process lose non-Muslim potential customers interested in investing in organisations whose activities are regarded as ethical. On the other hand, they have been criticised as being so anxious to tap funds from the Muslim masses that they opt for pragmatism over purity in the products offered, and in the process destroy the confidence of their Muslim customers. In short, Islamic banks as value-oriented organisations need to assess their corporate ethical identity and corporate branding process, as their current state seems to be controversial. Since we are not aware of any studies that specifically attempt to assess the strength of Islamic banks’ communicated ethical identity against a benchmark of ideal ethical identity, a discussion of what constitutes the ideal ethical identity based on the Islamic precepts follows.

The ideal ethical identity benchmark

Islamic banking refers to a system of banking which is consistent with the principles of Islamic law (Shari’ah Islami’iah). The Shari’ah governs every as- pect of a Muslim’s life, viz. spiritual, economic, political and social, and faithful execution of duties and obligations based on the Shari’ah is recognised as a form of worship. The Shari’ah is concerned with promoting justice and welfare in society (al-adl and al-ihsan) and seeking God’s blessings (barakah), with the ultimate aim of achieving success in this world and hereafter (al-falah).

There are five distinctive features that differentiate Islamic Banks (IBs) from their competitors (con- ventional banks): (a) underlying philosophy and values; (b) provision of interest-free products and services3; (c) restriction to Islamically acceptable deals; (d) focus on developmental and social goals; and (e) subjection to additional reviews by the Shari’ah Supervisory Board (SSB). Hence, Islamic banks, as economic and social institutions, must portray aspects of those five traits, drawn from both Shari’ah and business ethics,4 in their activities. These features form the ideal ethical identity benchmark used in this study, which is further described in the following paragraphs.

The underlying philosophy and values As mobilisers of savings on a large scale and caterers to fund-seekers in all sectors of the economy, IBs

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