The Impacts of Financial Development on Income Inequality and Poverty: A Case Study of Selected Islamic Countries

One of the main goals of Islam, and thus Islamic Economics is establishing justice. Obviously, one of the components of social and economic justice also is the condition of income distribution and poverty. The economic and financial surveys indicate that proper functioning of the financial system could be the potential for increasing of accumulation of physical capital, increase economic efficiency and economic growth in the long run which consequently leads to change the statement of income and income distribution. The aim of this study is to evaluate the effect of financial development on income inequality and poverty in selected Islamic countries. This study is used the combined data methods to test the research hypotheses during the period 2011-2000. Therefore according to survey results, the financial sector development and functioning of the financial system in Islamic countries has been able to reduce poverty and income inequality in these countries. The Islamic countries, due to the positive effect of financial development on poverty reduction and inequality in the economy of selected countries, should adapt the necessary arrangements, appropriate conditions for financial system progression, financial development, service increment and financial tools for income inequality and poverty reduction and improvement of income distribution in the country.

Keywords:

Financial Development , Income Inequality , Poverty , and Islamic Countries