Inequality, Concentration of Wealth and the Ownership Structure of Islamic Banks

Abstract

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, while 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. 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? The research in this paper illuminates the pertinent issues in light of the experience of Bahrain as one of the hubs of Islamic banking and finance.