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      Inequality, concentration of wealth and ownership structure of Islamic banks : Some pertinent issues

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          Abstract

          Purpose

          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, although 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. This paper aims to explore the issues of inequality and concentration of wealth in the context of Islamic finance.

          Design/methodology/approach

          This paper addresses a number of queries: 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? Using secondary data, this research illuminates the pertinent issues in light of the experience of Bahrain as one of the hubs of Islamic banking and finance.

          Findings

          The paper finds that the ownership pattern of Islamic banks in Bahrain lends credence to the entrenched, not-so-unexpected concentration of wealth.

          Research limitations/implications

          This study is based on data of one country. Further studies on other countries will help illuminate the relevant patterns and issues.

          Practical implications

          Inequality and concentration of wealth are among central economic issues in contemporary economic discourse. Because of the significant impact of such inequality and concentration, societies need to be more aware of these impacts and devise ways to address it.

          Social implications

          Inequality and concentration of wealth have fundamental social implications, as the issues of poverty, deprivation, exploitation, etc. are inseparable from concentration of wealth (accompanied by concentration of power), and widening wealth gap can cause or induce major socio-political upheaval.

          Originality/value

          Although inequality and concentration of wealth are robust fields of inquiry, this might be the first work addressing the issue of concentration of wealth in the context of Islamic finance in general and Islamic banking in particular.

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          Most cited references 55

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          Large Shareholders and Corporate Control

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            Is Open Access

            The Network of Global Corporate Control

            The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.
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              The option pricing model and the risk factor of stock

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                Author and article information

                Contributors
                Journal
                IJOES
                10.1108/IJOES
                International Journal of Ethics and Systems
                IJOES
                Emerald Publishing Limited
                2514-9369
                2514-9369
                12 August 2019
                : 35
                : 3
                : 444-465
                Affiliations
                Economics and Finance, University of Bahrain College of Business Administration , Sakheer, Bahrain
                Department of Economics and Finance, University of Bahrain College of Business Administration , Sakheer, Bahrain
                Author notes
                Mohammad Omar Farooq can be contacted at: farooqm59@gmail.com
                Article
                628821 IJOES-11-2018-0155.pdf IJOES-11-2018-0155
                10.1108/IJOES-11-2018-0155
                © Emerald Publishing Limited
                Page count
                Figures: 6, Tables: 8, Equations: 0, References: 80, Pages: 1, Words: 11000
                Categories
                e-conceptual-paper, Conceptual paper
                cat-ECO, Economics
                cat-SECO, Social economics
                Custom metadata
                M
                Yes
                Yes
                JOURNAL
                included

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