Over the last three decades, Islamic banking and finance has grown rapidly in the Muslim world. In countries like Malaysia and the UAE, Islamic finance is no longer considered a niche field as the total volume of halal exchanges constitute a substantial share in the overall amount of financial transactions. This study focuses on the role of Islamic finance in development and argues that the ability of these institutions to jump-start economic growth remains limited especially in areas where their involvement in money creation is constrained.

From a historical perspective, Islamic economic institutions (such as waqf, inheritance laws) have not been conducive to capital accumulation in Muslim societies. This has been further hampered by a lack of trust among different faith communities, where Muslims were historically charged higher interest rates by non-Muslim financiers. In addition to these legacies, the relationship between Islam, finance and economic development is also influenced by the conditions under which private money creation occurs. In settings where the state supports the private creation of money by building new market institutions, Islamic banks complement conventional finance in creating new lines of credit, and thereby open up new opportunities for growth. In the absence of a coordinated state involvement, Islamic finance plays only a marginal role in facilitating development. To develop these points, the study also discusses the link between monetary theory, finance and development, and presents comparative evidence from Malaysia and the UAE.

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Fulya Apaydin's work is situated at the intersection of comparative politics and international studies with a particular emphasis on the political economy of development. Broadly, she is interested in how investment policies across emerging economies are transformed in face of global pressures, and how political actors respond to these challenges at the local and national level. Her current research examines the implications of South-South capital flows on development with a focus on Islamic Financial Institutions. 

At IBEI, Fulya is also involved in the EUCROSS and ACCOUNTREG research projects. Recently, her work has been published in World Development and European Journal of Development Research, among others.