Solving Financial Distress with Ethical Banking

Financial distress can lead to many personal problems such as families falling apart, and relationships ending.  It is also a cause of several mental health related issues such as anxiety and depression, strain on personal relationships and self-esteem, and social exclusion. This perhaps leads to the conclusion that a financial systems should be in place that take into account not only the health of the economy but also the people. There are such systems which exists today, such as ethical banking and Shar’iah Banking which have the potential to perhaps lessen the burden of financial distress.


Financial distress and mental health can be in a constant cycle, poor mental health can lead to managing finances harder and worrying about finance can lead to worsening of an individuals mental health.  According to Office for National Statistics, 2002, one in 11 people in the UK reports being in debt or in arrears. For people with mental health problems this rises to one in four. This is a serious issue that requires addressing, regardless to this the UK’s average personal deft is continuously rising, which in return is resulting in the increase of mental health cases trigged by debt.


In todays day and age many find it impossible to avoid taking out personal loans or mortgages. In this economic climate individuals find themselves in a position where they must take some sort of loan, whether it’s to go to university to gain a education so they can hope to have a sufficient job/career that helps them pay off this loan or take out a Mortgage in order to buy a property. The average debt for the 2014 cohort of students that entered the workforce was £20,100. With the cost of living rising and increase in employment competition its no surprise that mental health issues are all time high amongst  people within the age group of 20-35.


As it will take decades to change the current system the solution to the problem is not a straightforward one. However, the phenomena of ethical banking may just be the answer, if implemented through the roots of current banking system today, a positive impact in the long term.


Ethical banking, in its simplest form can be defined as adopting sustainable policies that are socially and financially beneficial. One may argue the practicality of using such a banking system. The answer to this may lie the structure of Shar’iah banking. This banking system, agrees with the underlying principles of equitable distribution for everyone, the idea of fair-trading, spending of wealth judiciously, and the well-being of the community as a whole.


If we take away the ‘Shar’iah’ aspect out of Shar’iah banking, then we are simply left with a banking system that is essentially Ethical banking. Therefore these principles can be considered universal and applicable for individuals with all beliefs and backgrounds, but most importantly the inclusion of community and individual needs that are being considered in this system can help address and somewhat reduce people finding themselves in financial crisis that can result to initiating mental health problems.

About The Author

Hassan Waqar

Hassan is a keen entrepreneur. He is Founder of the National Association of Pakistani Entrepreneurs set up to help budding Pakistani Entrepreneurs. He is currently studying Business Management at Kingston University and the founder of Ummah Finance.

“As Founder and CEO, my role is to work with internal and external team to develop a vision and strategy and execute. My main role is business development, working with customers and partners to successfully create Islamic banking solution for the market.”