Global Report on Islamic Finance 2016: A Catalyst for Shared Prosperity? (Islamic Development Bank Group)

The primary goals of economic development are to boost economic growth and to equitably distribute the fruits of that growth. Despite growth, however, income inequality has increased considerably, especially in the aftermath of the financial crisis of 2007 08; today, one percent of the global population holds almost half of the global assets. The development community is unanimous in its support for initiatives to tackle the growing inequality in the distribution of income and wealth, but differences of opinion exist on the most effective approaches to achieve this goal.
Islamic economics and finance provide an alternative perspective and a potential solution that would enhance the extent and distribution of prosperity. The Global Report on Islamic Finance: Islamic Finance: A Catalyst for Shared Prosperity? makes a substantial contribution to the global discussion in three ways:
Developing understanding of the theoretical foundation of Islamic economics and finance and their relevance to shared prosperity
Reviewing development and trends in Islamic financial sectors
Identifying interventions and tools to leverage Islamic finance to eradicate extreme poverty and facilitate more equitable distribution.
The theoretical framework for economic development is based on four fundamental pillars: an institutional framework and public policy oriented to the developmental objectives of Islam; prudent governance and accountable leadership; promotion of the economic and financial system based on risk sharing; and financial and social inclusion for all, promoting development, growth, and shared prosperity.
Despite the substantial theoretical foundation and growth in Islamic financial services in recent decades, additional policy interventions and improvements are needed in several sectors to develop Islamic finance to promote shared prosperity, such as the following:
Banking
Capital markets
Taka¯ ful \non-bank financial institutions
Islamic social finance.
The key findings of this report include implementing a sound regulatory framework for Islamic financial institutions, given the obvious differences from the conventional banks, harmonizing shari ah standards, and increasing discourse related to the underlying mechanism of Islamic financial products. Islamic capital markets both equity and suku k (Islamic bonds) are vital for the development of Islamic financial markets. With adequate policy interventions and enabling financial infrastructure, Islamic finance could become a catalyst for alleviating poverty and boosting inclusive prosperity.