Ethical Banking: What It Means

Ethical banking, which could also be referred to as social, alternative, or social banking, is a system of banking that makes up a link between banking practices and the masses. That is, it brings the effects of banking practices on organisations, set-ups, individuals and society at large.

An ethical bank, in simple terms, is a bank built on laid down principles and objectives and this exerts a guiding influence over its relations with those who are outside.

There are peculiarities to every ethical bank because ethical banking is a term that extends far and wide, so its rigidity is diminutive, each bank has the decision of what principle to follow or what objective to roll with. Nevertheless, there are characteristics common to all, some of which include; Ethical banks carrying out various measures to the end that they make a huge impact on society, measures of which could be supporting community projects, setting up events and programmes beneficial to the masses, scholarships, grants and lots more.

All of this is just giving back to the community from profits made.

Consistency in adhering to ethics, ethical banks are consistent in complying with those laid down principles and objectives. Moreover, whatever the bank considers ethical on the outside must be upheld internally.

Ethical banks are concerned about the utmost satisfaction of their employees. In addition to allotting salaries to employees as deserved, they also invest in their personal development via seminars and training. They help employees with striking a balance between their career, home and their lives generally, by giving them paid maternity leave and other leaves, flexibility in their work schedule, et al.

Ethical banks try to stay away from illegal ventures and unethical investments.

Transparency; ethical banks manage and conduct public activity in a transparent manner.

Basically, ethical banking is the result of the shift from “monetary centralised economics” (profit maximisation) to “socio-environmental centralised economics” (acculturation of sustainable socio-environmental development into business operations).

Moreover, an ethical banking operation’s major goal is to improve societal welfare while also preserving the environment’s well-being. On the other hand, by focusing on ethical operations, a bank can improve its corporate image while also securing its social position and public recognition for the name it bears.

Despite the fact that ethical banking is a virtual idea, we feel that a bank cannot be labelled as such based just on a cosmetic effort or widespread promotion.

The sincerity of grounded operations that a bank deduces is at the heart of ethical operations.

Finally, the development of an ethical bank can be materialised by allowing the institution to work within a guided framework of regulations, economic and social instruments. This will cause a bank to face credit risks and liability risks if the investments made or assets possessed creates socio-environmental harm.