The transition toward sustainability and ethical banking is both timely and necessary. However, its success depends on more than rhetoric or superficial commitments. Without substantive institutional and regulatory reform, the expectations imposed on banks may exceed their structural capacities—threatening financial stability and the long-term viability of ethical finance.
This year’s Human Development report examines what distinguishes this new era of AI from previous digital transformations and what those differences could mean for human development (Chapter 1), including how AI can enhance or subvert human agency (Chapter 2). People are already interacting with AI in different ways at different stages of life, in effect scoping out possibilities, good and bad, and underscoring how context and choices can make all the difference (Chapter 3). Human agency is the price when people buy into AI hype, which can exacerbate exclusion (Chapter 4) and harm sustainability. And, of course, who produces AI and for what matter a lot for everyone (Chapter 5).
The banks’ ESG commitment can be in the form of adopting ESG framework in their banking operation and business strategy, incorporating ESG in credit assessment, and integrating ESG commitment in their banking products. In the case of Islamic banks, incorporating the environmental pillar can be adopted in the form of promoting green financing and integrating environmental risks in the banking operation. At the policy level, the financial authority is required to have an ESG framework to be implemented in the banking industry.
Prof. Khurshid Ahmad argues that the Western model of development overemphasized industrialization, capital formation, and technological transfer while neglecting social and cultural factors. This approach adopted as it is by the third world countries has led to negative consequences, including increased poverty, inequality, and dependence on foreign aid. Prof. Khurshid Ahmad emphasizes that the Islamic concept of development focuses on human development across moral, spiritual, and material dimensions. It encompasses the purification and growth of individuals and societies, striving for comprehensive well-being and prosperity in this world and the hereafter. He lists the goals of development policy within an Islamic framework which include human resource development, expansion of useful production, improvement in the quality of life, balanced development, evolution of new technology, and reduction of national dependency on the outside world.
He wrote extensively on Islamic microeconomics giving the Islamic perspective to the theory of consumer and producer behaviour. He would go beyond philosophical debates and narratives to also discuss the operationalization of the analysis of consumer and producer behaviour. He wrote several books, book chapters and research papers on Economics, Microeconomics, Development Economics, Essays on the issues in Islamic Economics and Islamic Banking.
Regarding taxation, Islam has laid out clear guidelines: not only is excessive taxation sinful, but even when collecting taxes even from non-Muslims, there should be no element of hardship. For example, Urwah ibn Zubayr narrated that Hisham ibn Hakeem (RA) once saw a tax collector in Homs mistreating some Christian Copts by making them stand under the sun while collecting Jizya. He objected, citing the Prophet Muhammad (PBUH) who said: “Allah will punish those who torment people in this world” (Sunan Abi Dawood 3045).
The awareness sessions conducted by banks focus on the prohibition of Riba, justified by Qur’anic verses and Ahadith, and explain how Islamic banks avoid it in their operations. This fosters a sense of religious superiority among those who begin to assume that the inherent beauty of the faith renders Islamic banking nearly flawless. Consequently, there is a growing belief that the employees of Islamic banks are more truthful, empathetic, and attentive to inquiries than those of mainstream banks. However, upon becoming customers of Islamic banks, they often observe that interactions with Islamic banking personnel at the front end are nearly identical to those with employees of conventional banks.
Author states that the validity of the homo economicus model has been challenged by substantial empirical evidence showing that human beings are not entirely rational in their economic decision making, and are prone to cognitive biases and sociological factors. Herbert Simon proposed the concept of “bounded rationality” to describe the limitations of human rationality. The behavioural economics movement also sought to incorporate psychological insights into economic analysis, to construct more realistic models of human behaviour. The validity of the homo islamicus model has also been questioned for being overly idealistic and not necessarily reflecting the actual behaviour of Muslim economic agents, who are profoundly shaped by the modern social context.
The authors highlight the negative effect of colonialism and double standards of Europe to keep the Muslim lands under colonial and imperial rule. They awakened the Muslims to avoid becoming laggards, isolated and mere consumers. Rather, they should also advance knowledge and sciences and do not feel shy in learning from the Western development experience. However, in doing that, they should not be uncritical to take everything European as acceptable, especially when it comes to interest based banking. Given that, there is much to take from socio-economic innovations such as the joint stock companies, mutual insurance, bank-based payment systems. The authors provided positivist explanations of how these institutions and structure avoid the problem of moral hazard, information asymmetry and achieve pooling of funds, risk diversification and efficiency.
The first role of money is to be a store of value- something that is expected to retain its value in a reasonably predictable way over time. Gold or silver that was mined hundreds of years ago would still be valuable today” (source) – So think of it as something that doesn’t really get affected by inflation, and hence won’t lose its value. Money’s second role is to be a unit of account. The thing that goods and services are priced in terms of. For example, the price of items you see on menus and tags. Pound is currency of the United Kingdom, but it could be a type of good instead. It could also be barter: ‘give me 5 goats if you want my new horse.
Islamic Economics Project 