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Inequality, concentration of wealth and ownership structure of Islamic banks

Author

Listed:
  • Mohammad Omar Farooq
  • Fouad Meer
  • Basit Iqbal

Abstract

Purpose - An important Islamic imperative is prevention of concentration of wealth among a few so that wealth circulates widely to enhance shared prosperity. In contemporary economic discourse, inequality and concentration of wealth have emerged as among key causes of instability and crisis. Unfortunately, although Islamic finance has emerged as a Shari’ah-compliant industry, it does not seem to be connected with the Islamic concern about inequality and concentration of wealth. This paper aims to explore the issues of inequality and concentration of wealth in the context of Islamic finance. Design/methodology/approach - This paper addresses a number of queries: Are Islamic banks, as the dominant component of the industry, helping to improve inequality and concentration of wealth and thus offer a better framework to deal with instability and crisis? Is the ownership structure of Islamic banks conducive to meeting the Islamic imperative regarding inequality and concentration of wealth? Using secondary data, this research illuminates the pertinent issues in light of the experience of Bahrain as one of the hubs of Islamic banking and finance. Findings - The paper finds that the ownership pattern of Islamic banks in Bahrain lends credence to the entrenched, not-so-unexpected concentration of wealth. Research limitations/implications - This study is based on data of one country. Further studies on other countries will help illuminate the relevant patterns and issues. Practical implications - Inequality and concentration of wealth are among central economic issues in contemporary economic discourse. Because of the significant impact of such inequality and concentration, societies need to be more aware of these impacts and devise ways to address it. Social implications - Inequality and concentration of wealth have fundamental social implications, as the issues of poverty, deprivation, exploitation, etc. are inseparable from concentration of wealth (accompanied by concentration of power), and widening wealth gap can cause or induce major socio-political upheaval. Originality/value - Although inequality and concentration of wealth are robust fields of inquiry, this might be the first work addressing the issue of concentration of wealth in the context of Islamic finance in general and Islamic banking in particular.

Suggested Citation

  • Mohammad Omar Farooq & Fouad Meer & Basit Iqbal, 2019. "Inequality, concentration of wealth and ownership structure of Islamic banks," International Journal of Ethics and Systems, Emerald Group Publishing Limited, vol. 35(3), pages 444-465, July.
    • Handle: RePEc:eme:ijoesp:ijoes-11-2018-0155
    DOI: 10.1108/IJOES-11-2018-0155
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    References listed on IDEAS

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