Promoting Sdgs and Shared Prosperity: The Potential Role of Islamic Economics and Finance

Abstract

Islamic Economics and Finance (IEF) system can play an important role in promoting SDGs because IEF system is inherently positioned to address some of the main global challenges that are also highlighted by SDGs: high rates of poverty and inequality, frequent and severe banking and financial crises, and economic growth that is environmentally unsustainable and excludes the poor. A detailed theoretical discussion regarding the potential role of IEF in promoting SDGs is presented in the first part of this chapter. Given that financial inclusion is an important factor in achieving SDGs, the second part of this chapter employs World Bank’s 2017 round of Findex data alongside cross-country regression analysis to examine the role of Islamic finance in enhancing financial inclusion among Muslim communities. The findings of this chapter identify some of the most important links between and an IEF system and SDGs. Furthermore, it establishes the fact that increasing access to Islamic financial services can increase financial inclusion in Muslim majority countries which in turn can help reduce poverty, inequality, instability, and economic exclusion in these countries. The logical outcome and policy implication of the theoretical arguments and empirical findings highlighted above is that enhancing access to Islamic financial services can play an important role in promoting SDGs.