Abstract
The unprecedented level of income inequality and wealth concentration throughout the world today has pose a foremost challenge in the efforts towards realising inclusive and sustainable development. One of the means to achieve this 2030 Agenda that has been strongly promoted by the international community is through the concept of financial inclusion. The dimensions of financial inclusion, which include access, usage and quality of financial services for all have been demonstrated to have positive impacts on increasing the ability of the poor and underprivileged groups to improve their economic well-being. Additionally, the literature has also identified two additional financial inclusion features of Islamic finance namely risk-sharing and redistribution, which can further contribute to the goal of distributive justice as aspired in Islamic economics. Nevertheless, despite the numerous works on financial inclusion and distributive justice in the literature of Islamic economics and finance, a specific framework to link financial inclusion with the goal of distributive justice is still absent in the literature. Therefore, the objective of this paper is to conceptualize a framework that links the dimensions of financial inclusion with the three phases of realising distributive justice, i.e. pre-production, post-production, and redistribution. This conceptual framework provides the necessary theoretical foundation and operational guideline for the promotion of financial inclusion as part of the efforts towards realising the goal of distributive justice in Islamic economics.
Highlights
Recent trends have witnessed an unprecedented level of income and wealth inequality
The recently launched Sustainable Development Goals (SDGs) by the United Nations represents the international response to this predicament with the aim of promoting a more inclusive approach towards economic development that will benefit the poor and the underprivileged groups in terms of poverty eradication, reduction in inequality, and overall improvements in the access to opportunities, amenities and better quality of life
The concern over the widening of wealth concentration, income inequality and socio-economic imbalances necessitate a systematic approach towards promoting distributive justice
Summary
Recent trends have witnessed an unprecedented level of income and wealth inequality. According to the World Inequality Report 2018, the top 1% in the world had twice as much income growth as the bottom half since 1980. Despite adopting the mainstream definition, i.e. the delivery of financial services at an affordable cost to the underprivileged groups, Mohieldin et al (2011) and Mirakhor and Iqbal (2011) added two elements of financial inclusion in Islamic finance which are risk-sharing and redistribution of wealth These two elements are important aspects of Islamic financial system that can further enhance the impact of financial inclusion towards realising inclusive growth and the reduction in wealth and income inequality. The Concept of Distributive Justice The precept of justice is considered as the central axiom in the development of Islamic economics and provides a comprehensive basis for its operational principles as well as its normative goals of realising socio-economic justice and overall human well-being (Ahmad, 2003; Barom, 2018) Major aspects of this normative goals, i.e. poverty eradication, needs fulfilment, equal opportunity, equitable distribution of income, reduction of extreme inequality, sustainable and holistic economic development (Chapra, 1979; Siddiqi, 1981), represent important features of distributive justice in Islamic economics. This section proceeds to integrate the various dimensions of financial inclusion into the three stages of distributive justice as depicted by Figure 1
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