Effectiveness of The Islamic Development Bank (IDB) in Promoting Development in Muslim Countries

ABSTRACT


INTRODUCTION
Islamic civilization has a rich and diverse history that spans over 1,400 years.During this time, Muslims have made significant contributions to the arts, sciences, and humanities.They have also achieved great economic prosperity, with a number of Muslim-majority countries leading the world in terms of imperial wealth.The economic advancement of Islamic civilization in the past can be attributed to a number of factors.One factor is the emphasis on trade and commerce in Islam.The Qur'an and Hadith encourage Muslims to engage in trade and commerce, and there are many examples of successful Muslim traders and merchants throughout history.Another factor is the development of Islamic finance.Islamic finance is based on Islamic principles, such as the prohibition of interest (riba).This has helped to create a more equitable and sustainable financial system.The economic advancement of Islamic civilization has also been driven by a strong emphasis on education and knowledge.Muslims have always placed a high value on education, and this has helped to create a skilled and educated workforce.
At the heart of Islamic civilization's economic success lay a fervent embrace of trade and commerce.Religious texts like the Qur'an actively encouraged Muslims to pursue financial prosperity, urging them to "seek the bounty of Allah" and engage in endeavors that build bridges of peace through economic opportunities and shared relationships.Verses like "And whoever is guided by Allah -he is indeed guided; and whoever is astray -then for him you are not a guardian" (Qur'an 2:262) highlight the belief that economic

Effectiveness of The Islamic Development Bank (IDB) in Promoting Development in Muslim Countries (Azzam Robbani)
activity, when conducted with righteousness, is not merely a pursuit of individual gain but a path towards divine guidance and societal wellbeing.This dedication to economic engagement, interwoven with Islamic principles, laid the foundation for a flourishing commercial landscape that would propel Islamic civilization to great heights.Another pillar of economic progress in Islamic civilization was the development of a unique financial system built on faith-based principles.At its core stood the rejection of riba, an exploitative form of interest deemed harmful to social equity and economic stability.Instead, Islamic finance embraced innovative alternatives like profit-sharing and risk-sharing, fostering partnerships where gains and losses were shared fairly.This not only promoted a more ethical and responsible approach to finance but also encouraged collective investment and entrepreneurship, further fueling economic growth and social justice.In this way, Islamic finance distinguished itself as a system that aligned economic prosperity with spiritual values, contributing significantly to the civilization's overall economic advancement.
Born from the collaborative spirit of Muslim nations, the Islamic Development Bank (IDB) emerged as a beacon of economic cooperation.Its foundation lay not merely in financial prowess, but in the noble aspiration to forge institutionalized solidarity among member countries.This article delves into the potential of IDB as a vital instrument in addressing the economic challenges that beset Muslim nations, while remaining cognizant of the competitive landscape of international financing institutions.Established through the concerted efforts of Muslim countries, the IDB stands as a potent force in tackling the economic hurdles faced by its member states.Its unique focus on Islamic principles of finance, coupled with its deep understanding of the cultural and historical contexts of Muslim nations, equips it with a distinct advantage.This advantage translates into tailored financing instruments, fostering infrastructure development, trade facilitation, and microfinance initiatives.For instance, the Jeddah-Madinah Expressway in Saudi Arabia and the Baku-Tbilisi-Ceyhan pipeline in Azerbaijan stand as testaments to IDB's successful infrastructure projects.
The international development landscape is not devoid of competition.Global financial institutions like the World Bank and the Asian Development Bank pose formidable challenges, attracting developing countries with potentially more diverse and comprehensive financial packages (Farida, 2010).IDB, though smaller in scale, holds its own ground through its niche expertise in Islamic finance and its deep-rooted commitment to fostering solidarity among Muslim nations.This commitment manifests in initiatives like poverty reduction programs and educational schemes, with programs such as microfinance loan provision for women in Pakistan and school construction in Afghanistan serving as potent illustrations.Therefore, evaluating the potential of IDB solely through the lens of financial clout would be a reductive analysis.Its true significance lies in its unique identity as a bridge between Islamic principles and contemporary development frameworks.As Muslim nations navigate the complexities of economic development, IDB's role transcends mere resource provision; it embodies a shared vision of progress, rooted in faith and solidarity.While acknowledging the presence of competitors, it is crucial to recognize that IDB occupies a distinct space, one that caters not only to financial needs but also to the socio-cultural aspirations of its member of Muslim countries.

Financial Mechanisms in Islamic History
The financial system of early Islam during the life of Rasulullah SAW and the spread of Islam began in the 7th century AD was based on a number of key principles, including the prohibition of usury (riba), the encouragement of charity and giving (zakat, waqf, and sadaqa), and the promotion of economic justice and social welfare (Chapra, 2008).One of the cornerstones of this system was the unequivocal prohibition of usury, known as riba.The Quran condemns practices that generate "unjust income" (Quran 30:39), emphasizing fair transactions and shared risks.This led to the development of alternative financing models, such as musharaka (partnership) and mudaraba (profit-sharing) agreements, where both parties actively participate in ventures and share in the gains or losses.These models fostered entrepreneurial spirit and encouraged collaborative partnerships, promoting prosperity for all stakeholders.
 Financial Instruments The financial system of early Islam, rooted in Quranic and Sunnah-based principles, relied on a unique arsenal of financial instruments to cultivate ethical, equitable, and socially responsible economic activity.Three prominent instruments stand out: Zakat, Waqf, and Sadaqa.The ethical and institutional framework of early Islamic finance, rooted in Quranic principles and exemplified by its instruments like Zakat, Waqf, and Sadaqa, serves as a crucial foundation for the role of the Islamic Development Bank (IDB) in modern times.The IDB leverages Zakat-like principles by channeling funds from wealthier member states to support development projects in poorer Muslim countries, bridging the economic gap and promoting social welfare.The IDB echoes the spirit of Waqf through long-term investments in infrastructure, education, and healthcare, creating lasting legacies for future generations.This framework serves as a guiding compass for the IDB's operations, ensuring its actions are driven by ethical principles, promote economic justice, and contribute to the sustainable development of Muslim countries in the modern world.

Islamic Development Bank (IDB)
The Islamic Development Bank (IDB) is an international financial institution established in 1975 to foster economic development and social progress in its member countries.The IDB is headquartered in Jeddah, Saudi Arabia, and has 57 member countries.The IDB was founded at the first Conference of Islamic Foreign Ministers held in Jeddah in 1973.The conference was convened in response to the growing economic and social challenges facing the Muslim world.The IDB was created to provide financial assistance to member countries for development projects and to promote economic cooperation among Muslim countries.

Provide financial assistance for development projects Foster economic cooperation among member countries
Promote economic cooperation among member countries Provide financial assistance to member countries for development projects

Promote the development of Islamic finance
Conduct research on economic and social development issues Promote the development of Islamic finance Table 3: Objectives and Roles of IDB The IDB's main activities as multilateral development finance institution focused on Muslim countries include providing financing for development projects, promoting trade and investment, and providing technical assistance to its member countries.The bank has a wide range of financing instruments, including loans, grants, and equity investments.The bank also provides trade finance, such as letters of credit and export guarantees.

Region Country GCC
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates Southeast Asia Brunei, Indonesia, Malaysia

Africa
Guinea, Guinea-Bissau, Mali, Mauritania, Mozambique, Niger, Nigeria, Senegal, Sierra Leone, Somalia, Sudan, Togo, Uganda Other MENA Algeria, Egypt, Iraq, Jordan, Lebanon, Libya, Morocco, Palestine, Syria, Tunisia, Turkey, Yemen Others Albania, Afghanistan, Azerbaijan, Guyana, Iran, Kazakhstan, Kyrgyzstan, Suriname, Tajikistan, Turkmenistan, Uzbekistan Table 4: Classification of member Muslim countries based on region The IDB provides funding to member countries based on several considerations, including membership, development needs, project feasibility, repayment capacity, and compliance with sharia.IDB funding has had a positive impact on economic and social development in its member countries (Ardianto, 2023).However, prioritizing the SDGs in project funding is important to achieve sustainable development in Muslim countries.By working together, Muslim countries can overcome the challenges they face and achieve the SDGs

Sustainable Development Goals (SDGs) Countries among Muslim
The Sustainable Development Goals (SDGs), also known as Agenda 2030, are a set of 17 interlinked global goals designed to be a "shared blueprint for peace, prosperity, people and the planet".The SDGs were adopted by all United Nations Member States in 2015, and they build on the Millennium Development Goals (MDGs), which were agreed upon in 2000.(IDB, 2023), the average score for Muslim countries on the SDGs is 61%.This is higher than the global average of 58%.There are a number of factors that have contributed to the progress made by Muslim countries in achieving the SDGs.These include: 1) Strong political commitment to the SDGs, 2) The existence of a number of Islamic development institutions that are working to support the SDGs, like IDB, 3) The active engagement of civil society and the private sector in the SDGs.

Goal
Vol. 1, No. 1, January 2024: 12 -26 However, there are still a number of challenges that need to be addressed in order to achieve the SDGs in Muslim countries.These include: Poverty and inequality, Conflict and instability, and Climate change.Despite these challenges, Muslim countries are committed to achieving the SDGs.The Islamic Development Bank has developed a number of initiatives to support the SDGs in Muslim countries.These include the SDGs Catalytic Fund, which provides financing for SDG-related projects, and the SDGs Knowledge Hub, which provides information and resources on the SDGs.

Sharia of Muslim Countries
Sharia, the Islamic legal system derived from Quranic principles and prophetic traditions, plays a significant role in shaping the legal, social, and economic landscape of Muslim-majority countries.However, accurately measuring the implementation and impact of Sharia across diverse countries poses a complex challenge.Understanding the application and impact of Sharia in Muslim-majority countries is a multifaceted challenge.Two prominent resources used in this endeavor are the State of the Global Economy Index (SGEI) and the Islamic Finance Development Index (IFDI).
Defining Sharia in a singular, universally applicable manner is difficult due to its inherent dynamism and interpretations varying across legal schools and individual jurists.Instead, a scientific approach might consider (IFDI, 2023): Formal Sharia: analyzing the official integration of Sharia principles into constitutions, legal codes, and judicial rulings.This includes examining the scope of Sharia jurisdiction, specific Sharia-based laws, and the institutional structures enforcing them.2) Social Sharia: assessing the influence of Sharia on social norms, customary practices, and public attitudes.This involves studying social perceptions of Sharia, compliance with Sharia-inspired norms, and the role of religious authorities in shaping social life.3) aconomic Sharia: Evaluating the application of Sharia principles in economic and financial systems.This entails analyzing Islamic banking and finance instruments, Sharia-compliant investment practices, and the integration of Islamic economic ethics into policymaking.

RESEARCH METHOD
To rigorously assess the effectiveness of the IDB's interventions across diverse Muslim countries, this research employs a robust quantitative approach anchored in strong data collection and meticulous statistical analysis.We will collect a comprehensive dataset comprising:  Total funding provided by the IDB to each Muslim country, ensuring accurate capturing of IDB's financial commitment across regions.The data was taken from IDB Open Data Portal  Official SDG scores for each Muslim country, drawing upon internationally recognized metrics to gauge progress towards sustainable development goals.The data was taken from The SDG Global Index. Islamic Finance Development Index (IFDI) data for each Muslim country, reflecting the level of compliance with Islamic economic principles within each region.The data was taken from ICD-LSEG Islamic Finance Development Report 2022.These are the research question and its associated sub-questions to aim to delve into the multifaceted impact of IDB interventions across diverse Muslim countries, using a quantitative lens grounded in comprehensive data collection and rigorous statistical analysis.The goal is to provide nuanced insights into the effectiveness of IDB's initiatives in promoting sustainable development and adherence to Islamic economic principles within the targeted regions.
Research With the data aggregated within the pre-defined regional categories (GCC, Southeast Asia, South Asia, Sub-Saharan Africa, other MENA, others), we can embark on in-depth statistical analysis.Descriptive statistics will paint a clear picture of IDB's funding distribution, SDG progress, and Shariah compliance within each region.This initial visualization will be followed by inferential statistics, including ANOVA and t-tests, to rigorously test for significant differences among regions in these crucial variables.
The data covers the total funding, SDG scores, and Shariah Index (IFDI) of Muslim countries by region.To conduct a regional analysis using Analysis of Varian ANOVA.In the context of ANOVA, the Shapiro-Wilk test is used to assess whether the data set for each group is normally distributed.The homogeneity of variance test is used to assess whether the variances of the data sets for the different groups are equal.
Moving beyond comparisons, regression analysis will delve deeper to explore the intricate relationship between IDB funding and SDG outcomes.By controlling for regional variations and accounting for potential confounding factors, this sophisticated technique will illuminate the nuanced impact of IDB's support on achieving specific sustainable development goals across diverse Muslim contexts.This datadriven quantitative approach provides a robust foundation for understanding the effectiveness of the IDB.By applying established statistical methods and drawing upon reliable datasets, we aim to ensure the scientific rigor and objectivity of our research findings, ultimately shedding light on the IDB's role in advancing development across the Muslim world.

Data Description
Our research embarks on a captivating statistical voyage, delving into the intricate relationship between the Islamic Development Bank (IDB) and its support for Muslim nations.Armed with robust data encompassing funding allocations, SDG progress, and Shariah compliance across pre-defined regional categories, we embark on a meticulous analysis to illuminate the landscape of development within these diverse geographies.Initially, descriptive statistics will act as our artistic brushstrokes, painting a vivid picture of the IDB's funding distribution, SDG progress, and Shariah compliance for each region.This initial visualization serves as a foundational map, revealing regional tendencies and disparities.

Graph 1 : Total Funding by Muslim Regions
From the pie chart above, it can be seen at first glance that the Other Mena region is the largest recipient of funding at 55%.Funding per region is as follows:  GCC: $ This is interesting because of the fact that the more countries in a region, the greater the likelihood of receiving funding for regional development.However, the purpose of IDB funding is not solely transactional.
It is therefore important to consider how far the region has developed in terms of Islamic law and socioeconomics.This can be determined by conducting the following statistical tests: Delving into regional funding differences demands caution before diving into ANOVA.We'll first ensure normality of data within each region using the Shapiro-Wilk test, and test for variance equality across regions with Levene's test.If these checks pass, ANOVA will reveal significant disparities and pinpoint regions receiving disproportionate shares.Exploring factors like region size, poverty, and development goals will then illuminate the potential reasons behind these funding patterns.

Normality Test
Normality tests are used to assess whether the data in a sample is normally distributed.This is important because many statistical tests, such as ANOVA, assume that the data is normally distributed.If the data is not normally distributed, then the results of these tests may not be accurate.

ANOVA Test
In scientific research, comparing the means of multiple groups often lies at the heart of investigations.This is where the Analysis of Variance (ANOVA) shines.Essentially, it's a statistical workhorse that allows to assess whether observed differences in group means are likely due to chance or reflect genuine underlying differences.

Table 8: Processed Data ANOVA Test Results
The analysis conducted using Analysis of Variance (ANOVA) reveals statistically significant differences in the Total Funding by IDB, SDG Score, and Average Islamic Finance Development Indicator across different regions.The factor considered in this analysis is the "Region," and the dependent variables include Total Funding, SDG Score, and Average Islamic Finance Development Indicator.The significance levels (Sig.) for each factor are less than 0.001, indicating strong evidence to reject the null hypothesis of equal means.

Discussion
The research questions outlined aim to investigate the potential impact of regional differences on various aspects within Muslim-majority countries.The purpose of this research is to answer the following questions and then provide an interpretation of the results regarding the effectiveness of the IDB's role in Muslim countries by region

Regional differences cause differences in Total Funding by IDB Muslim Countries
Investigation used whether regional variations significantly impact IDB funding allocation.Utilizing statistical analysis, we will assess whether specific regions consistently receive more or less funding compared to others.Identifying such patterns could reveal potential biases in funding distribution and necessitate addressing them to ensure equitable access across Muslim countries.The table above provides information on the SDG (Sustainable Development Goals) Scores among Muslim countries based on different regions.The Tukey HSD (Honestly Significant Difference) test was conducted to examine the differences in SDG Scores between these regions.Regional differences cause differences in Muslim Countries.The table shows that there are significant differences in SDG scores between regions.Sub-Saharan Africa has the lowest SDG score, at 53.95.This is followed by Other MENA with a score of 61.82.South Asia has the highest SDG score, at 65.37.GCC and Southeast Asia also have relatively high SDG scores, at 66.73 and 68.57, respectively.These findings suggest that Sub-Saharan Africa is lagging behind other regions in achieving the SDGs.This is likely due to a number of factors, including poverty, conflict, and climate change.Other MENA and South Asia are also performing below the global average.GCC and Southeast Asia are performing better, but there is still room for improvement.

Effectiveness of The Islamic Development Bank (IDB) in Promoting Development in Muslim Countries
(Azzam Robbani) The provided output appears to be the result of a Tukey Honestly Significant Difference (HSD) test, which is commonly used in analysis of variance (ANOVA) to identify significant differences in means between multiple groups.In this case, the groups represent different regions of Muslim countries based on the Islamic Finance Development Indicator (IFDI).Based on the provided output, the Tukey HSD test did not find any statistically significant differences in the average IFDI scores between the regional groups of Muslim countries.Therefore, the conclusion is that, according to this analysis, the IFDI scores do not differ significantly across the listed regions.The p-values are all very high (1.000),suggesting that any observed differences could likely be due to random variation rather than true differences between the groups.The dataset reveals significant variations in the Islamic Finance Development Indicator (IFDI) scores across diverse regions, shedding light on the economic adherence to Islamic principles within each geographical area.Notably, the Gulf Cooperation Council (GCC) countries exhibit a remarkably consistent and high average IFDI score of 55.This uniformity suggests a strong and unified commitment to Islamic economic principles within the GCC region.Conversely, Southeast Asian countries also demonstrate consistency but at a lower average IFDI score of 31, indicating a somewhat lower level of adherence compared to the GCC.South Asian nations follow suit with a consistent average IFDI score of 22, portraying a further decrease in economic adherence to Islamic principles.In contrast, Sub-Saharan African countries display a consistent, yet considerably lower, average IFDI score of 4. This finding implies a relatively modest integration of Islamic economic principles within the economic frameworks of the Sub-Saharan African nations.Other MENA countries, encompassing the Middle East and North Africa, present an intermediate scenario with an average IFDI score of 15.This indicates a moderate level of economic adherence to Islamic principles within this group, falling between the higher scores of GCC and the lower scores observed in Sub-Saharan Africa.The "Others" category, comprising countries not explicitly categorized into the aforementioned regions, also shows a consistent but relatively low average IFDI score of 4. This suggests a pattern of economic adherence similar to that observed in Sub-Saharan Africa.Overall, the statistical analysis of IFDI scores underscores substantial regional disparities in the economic adherence to Islamic principles, providing valuable insights into the varying degrees of integration and commitment across different Muslimmajority regions.

Ideal Role of Islamic Development Bank
The Islamic Development Bank (IDB) plays a crucial role in supporting the development of Muslim-majority countries.To maximize its impact, the IDB should carefully consider its priorities in terms of Muslim countries' development and promoting the Islamic economics ecosystem.
Addressing regional disparities is a crucial aspect of the IDB's strategy for Muslim countries' development.Our analysis underscores significant gaps in IDB funding, SDG progress, and the advancement of Islamic finance across regions.To promote fairness, the IDB should prioritize resource allocation based on need and potential impact, ensuring that support is accessible equitably across all Muslim-majority regions (IsDB, 2021).With South Asia facing substantial development challenges despite receiving the highest funding, it could be a key focus area.Additionally, prioritizing specific development goals aligned with poverty reduction, education access, and environmental sustainability, in line with the SDGs, can enable Muslim-majority countries to make tangible progress on multiple fronts.Strengthening institutional capacity is paramount for long-term development, and the IDB can play a pivotal role by offering technical assistance and capacity building programs to enhance governance, financial management, and other critical areas, empowering countries to effectively manage resources and achieve sustainable development.
The IDB holds a pivotal role in advancing the Islamic economics ecosystem through various initiatives (SGIE, 2023).It can actively contribute by innovating and promoting Islamic finance instruments tailored to the distinct needs of Muslim-majority nations, encompassing areas like infrastructure financing, microfinance, and social development projects.By broadening the spectrum of Islamic finance options, the IDB fosters financial inclusion and stimulates economic growth.Additionally, the IDB can offer technical assistance and capacity building to enhance the regulatory frameworks, risk management practices, and product portfolios of Islamic financial institutions in these nations, thereby fortifying the overall Islamic finance ecosystem.Investing in research and education pertaining to Islamic economics and finance, such as supporting academic institutions, conducting relevant research, and developing educational programs, will further augment knowledge and expertise, ensuring the sustained growth and viability of the sector (Hannase etc., 2020).
To fulfill its optimal role, the IDB must strategically prioritize funding, considering factors such as maximizing development impact through data-driven assessments of need and potential impact, giving higher priority to regions lagging in SDG progress or Islamic finance development.Equitable access to resources for all Muslim-majority countries, not just the highest-funded ones, should be ensured.Additionally, the IDB can enhance effectiveness by exploring innovative financing mechanisms like public-private partnerships to leverage resources more efficiently and foster greater development impact.By concentrating on these priorities, the IDB can further catalyze positive change in Muslim countries, contributing to overall development and the growth of the Islamic economics ecosystem, ultimately benefiting millions worldwide.

Table 2 :
Financial Institutions in earlier Islamic History

Peace, Justice and Strong Institutions 16
.3.Proportion of population reporting having felt safe walking alone at night in the city or area where they live 17.Partnerships for the Goals 17.1.Official development assistance (ODA) provided by developed countries as a percentage of their gross national income (GNI)

Table 5 :
SDGs indicatorsMuslim countries have made significant progress in achieving the SDGs.According to the Islamic Development Bank's 2023 SDGs Report

Table 6 :
Research QuestionEffectiveness of The Islamic Development Bank (IDB) in Promoting Development in Muslim Countries (Azzam Robbani)