The Islamic Development Bank Institute (IsDBI), in partnership with the London Stock Exchange Group (LSEG), has launched a new report examining how Islamic finance can help member countries overcome structural barriers to economic growth. The publication, titled Development Traps and the Role of Islamic Finance, was unveiled at the 20th AAOIFI–IsDB Annual Islamic Banking and Finance Conference held on November 2, 2025, in Manama, Bahrain.
The report forms the first volume in a new Development Traps Report Series and introduces a data-driven approach to identifying five core constraints that often slow or stall development progress. These include the Middle-Income Trap, Natural Resources Trap, SMEs and MSMEs Trap, Debt Trap, and Technology Trap.
Drawing on datasets from more than 20 global institutions, such as the World Bank, IMF, UNDP, WIPO, OPEC and the ILO, the report combines economic diagnostics with practical solutions grounded in Islamic finance instruments. These solutions include the use of sukuk for infrastructure financing, waqf for social funding, and muḍārabah and zakāt for shared-risk investment and poverty reduction.
Speaking at the launch, Dr. Sami Al-Suwailem, Acting Director General of the IsDB Institute, said the new publication offers policy guidance for governments seeking sustainable and inclusive growth. “The report provides early warning signals to help member countries avoid structural traps while leveraging the ethical and risk-sharing principles of Islamic finance,” he said. He noted that the partnership with LSEG “brings together global capital market expertise and Islamic economic values.”
LSEG’s Head of Islamic Finance, Mustafa Adil, highlighted the strategic relevance of Islamic finance to emerging economies. “Islamic finance is not only ethical; it is well positioned to support development priorities in markets seeking resilience and shared prosperity,” he stated.
The publication features commentary from leading economists and policymakers, including Dr. Bambang Brodjonegoro of the Asian Development Bank Institute and Dr. Mahmoud Mohieldin, UN Special Envoy for Financing the 2030 Agenda.
The next volumes in the series will explore each development trap in greater detail. The upcoming edition will focus on the Middle-Income Trap, addressing challenges of economic diversification, productivity and human capital development, alongside policy proposals rooted in Islamic finance.
