The 2025 Islamic Finance Development Indicator (IFDI) assessed 140 countries, with the global average score declining to 11 due to new entrants scoring low in most indicators. The top 10 countries remained unchanged, led by Malaysia and the UAE, which excelled across all five indicators. Notable shifts include Bangladesh dropping out of the top 10 due to Islamic banking sector challenges, while Tanzania showed promise with Sukuk issuance and sector growth.
The authors note that the instability leading to crisis is assumed away by the models which assume inherent stability. Economists are confined to models of stable states that are perturbed by limited external shocks. Economists failed to incorporate the intrinsic recurrent boom-and-bust dynamics characteristic of a complex economic system. Consequently, ‘systemic crisis’ is treated as an ‘otherworldly event’ absent from theoretical frameworks.
Using a contract-theoretic model, Khan compares two financial arrangements: the Fixed Return Scheme (FRS), which mirrors conventional debt, and the Variable Return Scheme (VRS), which represents profit-and-loss sharing (PLS) contracts such as Mudarabah or Musharakah. His analysis assumes a single lender allocating a fixed pool of funds across many independent projects, with symmetric information and costless observability.
Islamic Economics Project 