Islamic banking and finance (IBF) is legalistic in its very nature. Those who are involved in product development in Islamic financial institutions are very well aware that the Islamic jurisprudence of financial transactions is deeply rooted in ethics. There is an explicit emphasis on the understanding of contractual arrangements and honouring the terms and conditions therein. Morality in Islam is governed by implicit and explicit contracts that people enter into for different economic activities.
There is no conflict between the Islamic law and morality; the former merely formalises the latter.
Working for an Islamic business (i.e., an Islamic bank) in itself should induce good behaviour on part of its employees. In addition, it is the responsibility of Islamic banks and financial institutions to provide character-building training to its employees so that the business does not face undue reputational risks.
It may not be too demanding to ask Islamic banks to start spending on the character-building of their customers and clients. There are well-established credit scorecards that banks (including Islamic banks) use to assess credit worthiness of their customers. Similarly, character scorecards can easily be developed to assess morality of their customers. In the beginning, the proposed character scorecards may be based on the voluntarily provided information by their employees and customers, which can be further developed and refined with the availability of more detailed data.
This is not a far-fetched idea, as the government of China has already embarked upon a project to develop a social credit score, which will be based on all the actions and activities of the companies and individuals, stored in a central place. Although this project has temporarily been halted for a number of socio-political concerns, the project will resume after these concerns have been addressed. Based on the social credit scores, individuals and businesses will be given certain concessions or will face restrictions if their score falls short of a threshold. Credit scoring companies like Experian have credit files off all the individuals (who are listed on the national voters list) in the UK. The proposal here can be seen as an extension of the practice to include social behaviour.
As such social credit scores are not available at present, CSR-related activities of corporate clients of Islamic banks should be taken as preliminary indicators of good behaviour, and hence they should be positively discriminated. The inclusion of positive screens in addition to negative screens in Islamic asset management is a relevant trend in this respect.
Islamic banks should also start investing in a character scorecard similar to the proposed Chinese social credit card, which could be based on certain social, moral, and economic factors. For example, if someone is found to be involved in domestic violence, that person could be denied access to financial services offered by Islamic banks. In the beginning, it will be difficult to collect and collate data on customers, but it should be relatively easier to have such information on the employees of Islamic banks. Hence, a good start will be to develop the system for employees of Islamic banks, later to extend it to customers.
Some people may opine that this will amount to a Big Brother watching you all the time, which goes against civil liberties and individual freedom. This is certainly a valid argument. However, in this world of big data analytics, we are all being watched all the time in one way or the other. Smartphones and social media platforms continuously collect and store data on their users and customers. Credit card companies have detailed information on their cardholders and can very easily analyse their spending behaviour.
“Social behaviour should refer to contribution to charitable and good causes, involvement in promotion of civic services, and voluntary services like lollypop man services (or what is otherwise known as crossing guide services), etc.”
Obviously, a comprehensive character scorecard can only be developed with the help of government bodies and other big market players. The national citizenship registration authorities have data on all the individuals living in a country and through IT systems each and every individual is assigned a unique registration number. More data can be stitched around these unique registration numbers to develop a character scorecard. Without suggesting to have an open-ended all-encompassing character score system, we suggest that it should initially be based on five pillars:
FINANCIAL INTEGRITY
Financial integrity can easily be quantified by looking into the factors like involvement in fraud, tax evasion, and wilful default etc.
PERSONAL MORALITY
Personal morality should be based on whether the person has lied in the past, is involved in child labour (e.g., whether the person employs a child as a domestic worker), has been proven to be involved in domestic violence, and the related factors.
SOCIAL BEHAVIOUR
Social behaviour should refer to contribute to charitable and good causes, involvement in promotion of civic services, and voluntary services like lollypop man services (or what is otherwise known as crossing guide services), etc.
COMMITMENT TO ISLAMIC BANKING & FINANCE
Commitment to Islamic banking and finance may be gauged by looking into multiple accounts (with Islamic and conventional banks), attitude towards the prohibition of interest, and the general perception of Islamic banking and finance the person may have, etc.
ADHERENCE TO SHARI’A
Adherence to Shari’a is perhaps the most controversial from a secular viewpoint, and Islamic banks must take extra care to incorporate it in the proposed character scoring. It is recommended that non-Muslims should not be discriminated against on the basis of Shari’a adherence.
In the beginning, the proposed character scoring system may not be perfect but it will evolve into something meaningful. Like Human Development Index (HDI), as developed by United Nations Development Programme (UNDP), was not all-encompassing in the beginning but over the years it has given birth to a number of other sub-indices that have incorporated human development more comprehensively. Similarly, the proposed character scoring will also improve with the passage of the time.
Why is the proposed character scoring system important and why Islamic banks should spearhead this initiative? The proposed character scoring system is important because it will be a market-led process to reform Islamic societies. All other efforts (political, religious and purely reform-based) have failed to bring social reforms in the Muslim world. With the IT revolution it has for the first time become possible for the private sector to collect and collate information on individuals and corporates on various aspects of their lives and businesses. Hence, it is important for Islamic banks to come forward and play an important role in this respect. Access to finance is a basic need and there is huge emphasis being placed on financial inclusion all over the world. Islamic banks, emerging as important players in the financial systems of the countries where they operate, are in the best position to induce the required changes in individual behaviour and through an aggregation process in the social thinking and practices.
