Islamic Finance: Panacea for Rising Income / Wealth Inequality

The global economic downturn of 2008 brought forth the huge income / wealth disparity in the society. But what is more staggering is the fact that since 2008, the gap between the upper and the lower income strata has widened even further. And with the global economy on the cusp of another contraction (as predicted), this disparity will cripple it even more or vice versa. World Economic Forum has rated income inequality as one of the biggest global risks. Numerous policy initiatives by world bodies like United Nations and World Bank and various developed and developing economies have failed to yield any result. Progressive taxation policy adopted by some nations has not been really effective. The current economic system has failed to address the issue. An alternative system (Islamic Finance) with its deep rooted core values can provide an alternative. This paper will make attempts to understand the core tenets of Islamic Finance and how they can help in reducing the inequality.