Empirical Islamic Banking

It is a well-established rule in the Shariah (Islamic law) that a loan contract is of a charitable nature and as such the lender may not stipulate any excess or benefit from the borrower. However, it is also known in the Shariah that if the benefit from a loan comes to the lender voluntarily and it is not stipulated in the loan contract then it is permissible. This exception derives from some reports that the Prophet used to repay his debt with some increment, and to this effect he said: "The best amongst you are those who benevolently repay their debts”.

This paper is an attempt to provide comprehensive comparison between Ethical Finance and Islamic Finance. Authors undertake an analysis of the content of balance sheet disclosures of two banks, namely Islmai Bank Bangladesh Limited (IBBL) as an ideal Islamic Bankd and Triodos Bank as an ideal Ethical Bank. Furthermore, authors evaluate the similarities and divergences of business principles and practices of these banks, and provide policy recommendations.