Wealth Inequality, Asset Redistribution and Risk-Sharing Islamic Finance

The economics of wealth inequality is a nascent area of research. Although evidence shows that debt, interest, and leverage are drivers of increasing wealth inequalities, the literature is reluctant to focus on the debt-based system as a main culprit for wealth inequality. The authors show that risk-sharing, one of the pillars of Islamic finance, is a form of asset-based redistribution and an effective way to cope with the inequality problem.