The Islamic Development Bank Institute (IsDBI), in partnership with the London Stock Exchange Group (LSEG), has launched a groundbreaking report titled “Development Traps and the Role of Islamic Finance: An Introduction to Development Challenges Facing IsDB Member Countries.”
The launch took place during the 20th AAOIFI-IsDB Annual Islamic Banking and Finance Conference in Manama, Bahrain, where policymakers, economists, and industry experts gathered to explore how Islamic finance can help developing nations overcome long-standing structural barriers to growth.
Serving as the first volume in the Development Traps Report Series, this publication marks a major step forward in understanding how Islamic finance can drive sustainable development. The report outlines a data-driven framework for identifying and tackling five critical development obstacles: the Middle-Income Trap, Natural Resources Trap, SMEs & MSMEs Trap, Debt Trap, and Technology Trap.
Drawing on insights from over 20 international institutions—including the World Bank, IMF, UNDP, WIPO, OPEC, and ILO—the report combines quantitative data with Islamic finance principles. It highlights how Sharīʿah-compliant instruments such as sukūk, waqf, muḍārabah, and zakāt can help member countries overcome stagnation and achieve inclusive, long-term economic transformation.
The report also features expert perspectives from leading global economists and policymakers, including Dr. Bambang Brodjonegoro, Dean of the Asian Development Bank Institute, and Dr. Mahmoud Mohieldin, UN Special Envoy on Financing the 2030 Agenda for Sustainable Development.
Speaking at the launch, Dr. Sami Al-Suwailem, Acting Director General of the IsDB Institute, described the publication as “an important milestone in our efforts to provide actionable intelligence for policymakers. It offers early warning signals to help our member countries avoid structural traps and leverage the full potential of Islamic finance for sustainable, inclusive growth.”
He added that the collaboration with LSEG “bridges the analytical rigour of global capital markets with the ethical and risk-sharing foundations of Islamic finance.”
Mustafa Adil, Head of Islamic Finance at LSEG, said “Our partnership with IsDBI demonstrates how financial innovation and reliable data can be mobilised to address the most pressing development challenges. Islamic finance is not only ethical, it is strategically positioned to deliver impact in emerging economies.”
The newly released report lays the foundation for five subsequent thematic publications, each focusing on one of the identified development traps. The next volume—centred on the Middle-Income Trap—will delve into economic diversification, productivity growth, and human capital development, proposing actionable policy pathways grounded in Islamic finance.
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