moral code of conduct - iibi_isra - draft _10 09 2012

8/12/2019 Moral Code of Conduct - IIBI_ISRA - Draft _10 09 2012

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Institute of Islamic Banking and Insurance, London, UK (IIBI)International Shariah Research Academy fo r Islamic Finance, Malaysia (ISRA)

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INTERNATIONAL ANNUAL THEMATIC WORKSHOP 10 SEPTEMBER 2012Legal Compliance versusMoral Responsibi lity in Islamic Finance

Recommendation for a Moral Code of Conduct in Islamic Finance

DECLARATION(Draft)

I (name of person making the declaration) make this declaration on my own free will, andupon my honour.

My purpose is to serve the greater good of society. I will comply with the laws, regulations andcodes of ethics applicable generally and recognise that I also have moral obligations toensure that my behaviour conduct and actions do not adversely affect the well-being ofsociety, the natural environment and future generations. I recognise that I will face challengesand difficult choices in upholding the highest moral values and the goals of socio-economic

justice underpinning all contracts and dealings in Islamic financial services.

I declare that

I will be ever vigilant in aiding the general welfare of society, not engaging in such behaviourand conduct that will in any way bring harm, shame or dishonour upon myself and thereputation of the Islamic financial services industry. I will deal in a manner that I would likeothers to deal with me and abstain from whatever is likely to cause harm and consideredimmoral.

I will be mindful always to honour the rules of honesty, equity, fairness and justice and domy utmost to abide by these in my professional and personal dealings. I will at all times

remain vigilant and conscious that I am a guardian for everything placed under my care andwill not misappropriate or misuse things entrusted under my care or engage in immoralpractices.

I will not advance my personal interests above my moral obligations to society nor seekunjust enrichment at the expense of others. I will be concerned always about the right way orways in dealings where right is considered in a moral sense and distinguished from wrong orimmoral and does not involve exploitation of the innocent and gullible.

I will always have good intentions in all my dealings with others and take responsibility formy actions. I will remain accountable to my colleagues, peers and society for the harmfulconsequences of my negative intentions and actions. I will be truthful and not conceal,

attempt to conceal or withhold information that will cause or likely to cause intentional injusticeor harm to those I deal with and oppose any intentional injustice and harm by others.

I will not be ashamed to recognise ignorance in my knowledge and competence. I will seekadvice from colleagues and peers to increase my knowledge and competence to ensure mybehaviour, conduct and actions upholds honesty, justice, equity and fairness in all mypersonal and professional life. I recognise that I must set an example of honesty, integrity andhighest moral standards of behaviour and conduct that define my credibility in all my dealingsand in society at large.

WHILE I CONTINUE to abide by my declaration I may be granted to enjoy a good li feand the trust and respect o f my colleagues, my peers and other members of society,but should I fail to do so and my intentions and dealings are immoral in pursuit of self-

interest and unjust enrichment, may I be guided toward what is right and moralotherwise may the opposite be my fate.

continued / Why a Code of Moral Conduct should be adopted in Islamic Finance


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Why a Moral Code of Conduct should be adopted in Islamic Finance

In financial services, there are codes for professional ethics, but it is uncommon to hearabout a moralcode of conduct for professional. Islamic finance already has theunderpinnings of a moral framework yet there has been no desire to codify a formal systemor set of explicit rules of behaviour and conduct that people engaged in the Islamic financial

services industry should be committed to follow in their personal and professional dealings. Itshould be accepted that if a practitioner of financial services is not infallible, then there canbe no disagreement that there exists a need for limitation and guidance which can assist theirdecision making, especially when such decisions can harm and endanger the lives andproperties of other people, society and future generations.

It is commonly assumed that the Shariah framework of rules and guidance is an adequatesafeguard for moral hazard in the Islamic financial services industry. This usually assumesthat the Shariah Supervisory Boards are responsible for Shariah compliance of products,transactions and services by Islamic financial services industry. It is not easily apparent towhat extent the various stakeholders in the industry subscribe to uphold the Shariah rulesand whether they are aware of what it entails in their personal and professional dealings.

The Institute of Islamic Banking and Insurance UK (IIBI) and the International ShariahResearch Academy in Islamic Finance Malaysia (ISRA) have drafted a Moral Code ofConduct in Islamic Finance based around a behavioural code laying down the principles thatshould be subscribed by the various stakeholders in Islamic financial services industry;particularly the leaders, senior managers and Shariah advisors. Professor Rodney Wilson,founder of the Islamic Finance Programme at Durham University, UK aptly says, respectfor Shariah is concerned with determining the right way or ways for financial dealings whereright is interpreted in a moral sense and distinguished from wrong or sinful. Citizens can abideby national laws, yet behave in an immoral way, including in financial dealings where laws areunable to curb speculative behaviour or exploitation of the gullible. [Legal, Regulatory andGovernance Issues in Islamic Finance]

It is believed that a Moral Code of Conduct in Islamic Finance would have the following

benefits:

It is likely to be the first of its kind in the financial services industry responding todemands for morally responsible bankers and standards in banking services.

It should enable individuals to look at their own consciences and freely choosebetween moral behaviour for a better way of life aligned to the interest of society as awhole, and immoral behaviour that has the opposite result.

It should be a step towards realising the benefits of the higher objective of theShariah for achieving socio-economic justice in society.

It would further the own prestige of professionals and Shariah advisors engaged inIslamic financial services.

The idea should eventually become a distinguishing feature of the Islamic financialservices industry and enhance its credibility.

It should generate and maintain public debate about the potential problem of moralfailures and setting higher moral standards for bankers and in banking practices.

Rationale for a Moral Code of Conduct

Code of Ethics

A code of ethics is generally defined as a set of guidelines on acceptable and expectedbehaviour of members of a professional group, however; most do not define moralbehaviour of individuals and organisations.


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Morals and ethics though seemingly similar are in fact quite distinct. Morals are more aboutgood and bad, what constitute right conduct and behavior as part of an individuals personallife; whereas ethics normally entails a set of guidelines that defines accepted practices andbehaviour for a certain group of people. Although ethics can define a code that a society orgroup of people adhere to morality delves into right and wrong at a much deeper level whichis both personal and spiritual.

Morals and Financial Services PractitionersMoral failures in banking and finance have shown that humans are not infallible and do notalways act in the interests of the wider society. Despite attempts by professional andregulatory bodies in financial services to promote a Code of Ethics, their adoption by banks isoften reduced to mere "compliance", which entails a literal adherence to regulatoryobligations. Broadly, the banks Code of Ethics will normally be restricted to an outline ofoperating procedures and principles and also potential ethical issues such as confidentiality,bias and misuse of information, etc.

There are constant calls for moral reform within banks and financial institutions. However,unless the regulatory framework requires that the behaviour of bankers has moralunderpinnings, society is likely to continue to suffer the financial and economics consequenceof immoral behavior. Banking when conducted at the margins of the law with little or no regard

for right or wrong in the moral sense will always lead to financial destruction and harm for thepeople. The moral underpinnings will require an understanding that moral obligations shouldtake precedence over other obligations. A regulatory framework, no matter how sophisticated,may not be able to prevent the cycle of financial crises if the regulatory framework does notprovide for certain rules to be held sacred and inviolable and prohibit transactions where theharm is disproportionately greater compared with the benefits.

In reality, decision making will always be influenced by substantial commercial pressures and,moreover, the overwhelming greed for greater riches. This is what drives the creation offinancial products that are structured for an immoral purpose yet made to comply(technically) with the prevailing laws and regulations. However, despite these moral failings, itis also true that bankers of different religious faiths, and those without religious faith, have apersonal sense of what is morally right and morally wrong. Unfortunately, society at times of

financial crises find itself locked in a culture that accepts lower standards of morality that openthe doors for self-interest for maximising profits and unregulated markets. The challenge forsociety is to change the status quo and emphasise moral education at all levels.

Examples of Moral Codes of Conduct

MBA OATHIt is this humility and acceptance of human behaviour that led Graduates of the HarvardBusiness School to take initiative in 2009 and promote a widespread movement for MBAsgraduates; their campaign was designed to inspire people to lead in the interests of thegreater good and commit toward living out the principles articulated in an oath, a voluntarypledge to create value responsibly and ethically. (http://mbaoath.org/).

MORAL AND ETHICAL CONDUCT CODE OF DUTCH BANKERS ASSOCIATIONThe members of the Managing Board of NIBC Bank N.V. each signed a moral and ethicaldeclaration proposed by the Dutch Banking Code which entered into force on 1 January 2010.(http://www.nibc.com/about-nibc/corporate-governance/moral-and-ethical-conduct-declaration.html).

OLYMPIC COACHES CODEThe code for the Olympic coaches committing them to the highest ideals of sport andrequiring them to observe the code, to act professionally and take responsibility for theiractions, not to drink alcohol, smoke or take illegal drugs while representing Special Olympicsat training sessions, competition or during Games.

(http://www.specialolympics.org/Sections/Sports-and-Games/Coaches_Code_of_Conduct.aspx).

HIPPROCRATIC OATHThe Hippocratic Oath envisaged over 2,500 years ago for qualified Physicians continues to be


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an invaluable moral guide with the same aspirations requiring that doctors should act in thebest interests of their patients, and when unjust circumstances arise they should strive tocorrect the injustice harming their patients.

The Hippocratic Oath(A Modern Version)

I SWEAR in the presence of the Almighty and before my family, my teachers and my peers that

according to my ability and judgment I will keep this Oath and Stipulation.

TO RECKON all who have taught me this art equally dear to me as my parents and in the same spiritand dedication to impart a knowledge of the art of medicine to others. I will continue with diligence tokeep abreast of advances in medicine. I will treat without exception all who seek my ministrations, solong as the treatment of others is not compromised thereby, and I will seek the counsel of particularlyskilled physicians where indicated for the benefit of my patient.

I WILL FOLLOW that method of treatment which according to my ability and judgment, I consider for

the benefit of my patient and abstain from whatever is harmful or mischievous. I will neither prescribe

nor administer a lethal dose of medicine to any patient even if asked nor counsel any such thing norperform the utmost respect for every human life from fertilization to natural death and reject abortionthat deliberately takes a unique human life.

WITH PURITY, HOLINESS AND BENEFICENCE I will pass my life and practice my art. Except for

the prudent correction of an imminent danger, I will neither treat any patient nor carry out any researchon any human being without the valid informed consent of the subject or the appropriate legal protector

thereof, understanding that research must have as its purpose the furtherance of the health of thatindividual. Into whatever patient setting I enter, I will go for the benefit of the sick and will abstainfrom every voluntary act of mischief or corruption and further from the seduction of any patient.

WHATEVER IN CONNECTION with my professional practice or not in connection with it I may seeor hear in the lives of my patients which ought not be spoken abroad, I will not divulge, reckoning that

all such should be kept secret.

WHILE I CONTINUE to keep this Oath unviolated may it be granted to me to enjoy life and the

practice of the art and science of medicine with the blessing of the Almighty and respected by my peersand society, but should I trespass and violate this Oath, may the reverse by my lot.

THE BUDDHIST CODE OF MORAL CONDUCTThe First Precept : Panatipata Veramani(Abstaining from taking the lives of living beings)The Second Precept :Adinnadana Veramai(Abstaining from taking that which is not given.)The Third Precept : Kamesumicchacara VeramaniAbstaining from sexual misconductThe Fourth Precept : Musavada Veramani(Abstaining from false speech)The Fifth Precept: Suramerayamajjapama datthana Veramani(Abstaining from distilled and

fermented intoxicants which are the occasion for carelessness which also includes drugs).

MARRIAGE VOWSMarriage vows taken at weddings stand upon the foundation of justice and truth rooted inmorality and evoke the moral values, whether or not a person has a religious belief. Forexample, pledge to remain faithful and fulfil obligations, sharing, generosity, honour and carefor each other.

Institute of Islamic Banking and Insurance, London, UK (IIBI)International Shariah Research Academy fo r Islamic Finance, Malaysia (ISRA)10 September 2012

moral code of conduct - iibi_isra - draft _10 09 2012

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