DEVELOPING AN ISLAMIC BOSNIAN DIASPORA MUTUAL FUND: ISLAMIC FINANCE, DIASPORA PHILANTHROPY AND THE ECONOMIC DEVELOPMENT OF BOSNIA AND HERZEGOVINA

Abstract

This paper analyzes the potential of Diaspora philanthropy in an Islamic economic context specific to the development of Bosnia and Herzegovina. The Bosnian War in the late 1990s created a large Bosnian Diaspora population that resulted in significant increases in the country’s remittance inflows, which continue to account for a large percentage of Bosnia’s GDP. While some financial remittances are invested, most are used towards consumption and contribute very little to the country’s economic development, oftentimes leading to negative long-term effects including a significant youth brain drain. However, Islamic finance presents a potential revolution in the role remittances, as a form of Diaspora Philanthropy, play in economic development and poverty eradication within Bosnia. Namely through the creation of an Islamic Bosnian Diaspora Mutual Fund which pools remittances in the form of investments. The aim would be to primarily mobilize remittances, which individually have very little economic potential, and invest them in Shari’ah compliant instruments and endeavors in Bosnia. Return on investments could then be pooled into philanthropic funds which would be used towards supporting small and medium business growth and combat issues related to unemployment. Thus, this paper discusses the potential of Islamic finance in organizing and revolutionizing Diaspora efforts (financial remittances) in detail. It presents a case for Islamic finance and its role in effectively strengthening Diaspora philanthropy in order to contribute to the economic development of Bosnia and Herzegovina while presenting a potential model for the Mutual Fund.