IsDBI and LSEG Launch Report Strengthening Pathways to Overcome Middle-Income Trap with Islamic Finance
Baku, Azerbaijan – The Islamic Development Bank Institute (IsDBI) and the London Stock Exchange Group (LSEG) have unveiled a new joint report titled Surmounting the Middle-Income Trap: Drivers, Pathways, and the Role of Islamic Finance. The report was launched on June 17, 2026, during the 20th IsDB Global Forum on Islamic Finance, coinciding with the IsDB Group Annual Meetings in Baku.
This publication marks the second installment in the Development Traps Series, focusing on the middle-income trap—a significant long-term development challenge for many IsDB member countries. It provides a policy-oriented analysis of how Islamic finance can facilitate more inclusive, productive, and resilient development pathways.
Understanding the Middle-Income Trap
Many IsDB member countries remain classified as middle-income nations, grappling with various challenges that hinder their economic advancement. These challenges include slow productivity growth, limited structural changes, financing difficulties, widespread informal economic activity, inequality, debt risks, technological gaps, and insufficient institutional capacity. Such factors complicate the transition from middle-income to high-income status.
Dr. Sami Al-Suwailem, Acting Director of IsDBI, emphasized the report’s relevance, stating that the middle-income trap presents a substantial obstacle to development in numerous IsDB member countries. He noted that the report offers a timely examination of the structural barriers affecting productivity and inclusive growth, while exploring how Islamic finance can foster development through risk-sharing, asset-backed financing, and social finance.
Key Findings and Recommendations
The report asserts that overcoming the middle-income trap necessitates coordinated reforms and enhanced institutional frameworks. It advocates for sustained investment in human capital, increased productivity, innovation encouragement, economic diversification, and the development of financing models that underpin real economic growth.
Furthermore, the report highlights the potential role of Islamic finance in addressing these challenges. It discusses various financial instruments, including risk-sharing and equity financing, asset-backed financing, trade finance, and sustainable financing. Additionally, it examines Islamic social financial instruments such as zakāt, waqf, qarḍ ḥasan, and ṣadaqāt, which can support the productive sector in raising funds, promoting infrastructure and innovation, and fostering financial inclusion.
Mustafa Adil, Head of Islamic Finance at LSEG, expressed satisfaction with the collaboration, stating that the report combines data-driven analysis, market perspectives, and Islamic finance expertise. This collaboration aims to provide a robust evidence base for policymakers, regulators, financial institutions, and development partners addressing long-term constraints in middle-income economies.
Tailored Framework for Member Countries
IsDBI’s contribution to the report aligns with its mission to support member countries through applied research, policy advice, capacity building, and knowledge solutions in Islamic finance and development economics. The partnership with LSEG underscores the advantages of integrating Islamic finance expertise with data-driven analysis and global market insights.
The report introduces a segmented framework tailored for middle-income IsDB member countries, offering policy recommendations based on each country’s unique characteristics, development goals, and implementation capabilities. It outlines practical approaches for leveraging Islamic finance to promote structural transformation, productive investment, inclusion, resilience, and sustainable development.
This publication aims to assist a diverse audience, including policymakers, regulators, financial institutions, development partners, researchers, and other stakeholders, in tackling long-term development challenges within IsDB member countries.
The report is available for access on the IsDBI website here.
About the IsDB Institute
The Islamic Development Bank Institute (IsDBI) serves as the knowledge hub of the Islamic Development Bank Group. Guided by the principles of Islamic economics and finance, IsDBI leads the development of innovative, knowledge-based solutions to support the sustainable economic advancement of IsDB member countries and various Muslim communities globally. The Institute fosters economic development through pioneering research, human capital development, and effective knowledge management. More information about IsDBI can be found on their official website.
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Source: www.zawya.com
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Published on 2026-06-17 13:03:00 • By the Editorial Desk
