Pillar III - Risk-Sharing and Entrepreneurship (Distribution)

The third pillar, risk-sharing and entrepreneurship, is about the distribution channel, affecting both individuals and organizations. Islamic economics promotes an exchange-based financial system on the distribution side, which builds on money-for-goods-and-services and goods-and-services-for-money. Therefore, the consequent distribution of resources always has real effects on economic activity. One of the distinguishing aspects of development in Islam is the essentialization of risk-sharing and the promotion of entrepreneurship. This sets the Islamic development framework apart from the conventional approach where over-reliance on debt-dominated risk-shifting systems is apparent. An economic system based on risk-sharing and asset-based financing ensures stability and leads to a resilient financial system. The growth of equity-based capital markets can help mobilize resources without creating excessive leverage or borrowing in the economy.

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