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Fighting global inequality with Islamic finance

Fighting global inequality with Islamic finance

A January 2017 report issued by Oxfam found that the eight richest individuals in the world have a net wealth of $426 billion–equivalent to the total amount of wealth held by the poorest 50% of the global population (some 3.7 billion people). That same report found that the world’s 10 largest corporations together have revenue greater than that of the 180 poorest countries combined. Not included in the report is the similarly deplorable statistic that nearly 25% of the 1.6 billion Muslims globally live in extreme poverty. While tools like zakat — which requires Muslims to give 2.5% of their wealth each year to help those in need — are vital in the struggle to mitigate the effects of inequality, we can sometimes overlook the potential of faith-based solutions to address the root causes of inequality as well. One of the most significant of these causes — the lack of financial inclusion — can be effectively addressed through access to Islamic banking. Only 10-15% of adults in Muslim-majority countries in Sub-Saharan Africa and Central, South, and Southeast Asia have bank accounts. Greater access to formal financial services like Islamic banking could help alleviate the structural poverty in these regions and

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Bridging the wealth gap: What to do about global inequality

A January 2017 report issued by Oxfam found that the eight richest individuals in the world have a net wealth of $426 billion–equivalent to the total amount of wealth held by the poorest 50% of the global population (some 3.7 billion people). That same report found that the world’s 10 largest corporations together have revenue greater than the 180 poorest countries combined. Impact investing has a role to play in addressing this shocking inequality of wealth. Although many tools are necessary to reduce wealth disparities, participation banking and trade finance are especially promising and should be supported by the investor community. Participation banks: Serving the underserved Public perception of the finance industry holds that it only exists to benefit the rich, exacerbating the wealth gap and entrenching inequality. While this may be true in many cases, participation banking is different. Part of the community banking movement, participation banking requires financial institutions share responsibility for the poor in society. Each bank takes part in socially responsible activities by setting aside a certain amount of its total funding sources to serve the community in which it operates. One example of the better banking behavior common among participation banks is providing interest-free loans

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