Since the start of the global economic crisis in 2008, financial education has been under increased scrutiny from those dissecting what went wrong. Who, after all, had trained the perpetrators of the crisis? Were the “masters of the universe” ever taught about ethics? And if not, why not?
Training in Islamic finance, which was already gaining in popularity pre-crisis, has grown from strength to strength, as it has developed a reputation as a haven of common sense and relative security in uncertain times.
At least two of the causes of the crisis – gharar (risk) and gambling – are banned by sharia (Islamic law).
“Several of the ethical lapses which occurred in the financial sector are prohibited in Islam,” says Omneya Abdelsalam, the director of the El Shaarani Research Centre for Islamic Business and Finance and the director of the MSc in Islamic Finance at Aston Business School. “[The crisis] highlighted the resilience of Islamic banks.”
She says that religious beliefs, not limited to Islam, can help leaders be more responsible in business.
“The belief in God, and that absolute ownership of everything is solely His, brings with it an acute level of responsibility and accountability based on the notion of stewardship, which is equally placed on each individual, given that all mankind is believed to be equal before God.
“Such beliefs have a direct and powerful impact on the way business is conducted.”
This “notion of stewardship” or khalifa, common to all Abrahamic faiths but particularly central to Islam, overlaps considerably with corporate social responsibility and transparency, two areas that have enjoyed a post-crisis boom.
Dr Abdelsalam says khalifa manifests itself in Islamic businesses “through fulfilling social responsibility of the business to the best of its capabilities, including fair treatment of employees, care for the environment and customers, and fulfilling the obligation towards shareholders and other stakeholders, through wise use of financial resources”.
At Aston, the Masters in Islamic finance encourages students to think about ethics in every module, be it accounting, contract law, or conventional finance modules.
Cedomir Nestorovic, a professor of Islamic business and management at the Singapore campus of Essec, a French business school, agrees that Islamic finance courses need to address these issues.
He says: “A course about Islamic finance should not be teaching financial techniques alone. There must be a part dealing with religious and ethical issues, explaining the rationale behind the industry.”
Prof Nestorovic adds that elements such as marketing and management must also become more integral parts of Islamic courses, so that they increase their breadth.
One criticism aimed at Islamic finance instruments and banks, or Islamic finance divisions within conventional banks, is they do not embrace the spirit of sharia, but try to find ways round it, in an emulation of conventional finance.
“There is a trend to consider Islamic finance as a ‘cosmetic’ industry where products and services are conventional ones with an Islamic veneer, the only purpose to obtain clearance from thesharia board,” says Prof Nestorovic.
The danger is that Islamic finance, in trying to become more popular, loses its firm roots in religion and ethics.
Some Islamic scholars, adds Prof Nestorovic, “consider that Islam finance does not exist because riba (interest, banned under sharia) is embedded in contracts, even if it is not labelled as such”.
“There is also a certain disagreement between Islamic countries about the definition of a tangible asset and some accounting principles.
“All in all, there is a gap between what is taught and realities for a certain number of observers,” says Prof Nestorovic.
Small business confidence in Wales lowest in the UK shows FSB research - WalesOnline
Confidence levels in the small business sector in Wales are the lowest of any nation or region in the UK, according to new research published today by the Federation of Small Businesses.
The FSB’s latest Voice of Small Business Index for Q2 of this year shows in Wales a net balance on business confidence of minus 12 points – representing a two point improvement on the position in Q1.
However, despite a narrowing of the gap between negative and positive outlook responses, Wales swaps places at the bottom of the leaguetable with Northern Ireland, which saw its negative balance improve markedly from minus 33 in Q1 to minus 6.
In terms of confidence the north-east of England have the most upbeat small firms, with a net positive balance of 16 having been minus nine in Q1.
In Scotland, although still in positive terrain, the positive outlook fell from plus nine to plus 4. In the south-west of England it was up 1 point to plus 10.
As well as Wales and Northern Ireland there were also negative balances in London, the Midlands and Yorkshire & Humberside, while for the north-west it was neutral.
Despite pressures, UK-wide confidence just remains in positive territory at plus 1.3, down 0.9 points on Q1.
The survey was conducted before George Osborne’s £100bn liquidity plans for the economy announced in his Mansion House address last Thursday.
The FSB wants his Funding for Lending Scheme to provide cash to those firms that need it, with a clear reporting process so that tangible evidence is given to show the money is being passed on to small firms and not just shoring up the banks.
Janet Jones, Welsh Policy Unit Chair for the Federation of Small Businesses, said: “Overall, the Small Business Index across the UK remains in positive territory, despite a slight decrease since Q1 and despite still only being mildly above zero.
“Although business confidence has not risen as sharply in Wales as in other parts of the UK – meaning we are reporting the worst business confidence – the slight increase does show signs of improvement whilst other parts of the UK have seen a marked drop.
“The index highlights serious constraints to growth, notably access to finance, with many small firms still finding it difficult to access credit which can result in them missing growth opportunities.
“Access to capital is an absolute necessity and the Welsh and UK Governments must give serious consideration to giving small businesses realistic alternatives to bank finance.
“A further issue is that with 63% of small firms saying that fuel is the main upwards driver of business costs, we urge the Chancellor to cancel the planned 3p rise in duty for August.”
The research found that than four in 10 (41%) small firms were refused finance from high street banks as confidence dipped in the second quarter.
However, despite the credit squeeze, more than 50% of respondents said they still plan to grow their businesses over the coming 12 months.
But the proportion of firms looking to grow rapidly shrank from 10.9% Q1 to 7.2 % in Q2.
With one in five firms saying access to finance is the main barrier to achieving growth aspirations, the FSB believes the credit squeeze will impair small businesses’ growth plans, reduce new job creation and further set back the UK’s struggle to emerge from recession.
Of 17 industry sectors measured, confidence fell in all but two. Confidence rose moderately in health and social work related firms, as well as vehicle sales and maintenance companies.
All other sectors reported a fall with financial and real estate services showing a dramatic decrease.
There were further sharp falls in retailing, leisure, sports and entertainment, as well as hotels and the restaurant and bar trade. A moderate decline in confidence was reported in manufacturing, IT and other business services.
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