Assessing Islamic finance development through a new index: an alternative approach

Purpose This study empirically evaluates the impact of the Islamic finance development index, created as an alternative to the methods and variables used in the Islamic Finance Country Index (IFCI), for 48 countries. To address the ambiguity in the index calculation technique used in the IFCI Report covering the period from 2011 to 2022 and to enhance this index, alternative research is being conducted. This study aims to construct a new Islamic finance development index to objectively measure countries’ potential and strategic status for the global development of Islamic finance through comparative methods, specifically the Scoring Approach and Promethee-II. Design/methodology/approach Ranking and scoring the criterion after weighing, utilising the novel scoring approach to create a unique index after the weight calculation, is found. Findings The findings imply that the Islamic finance development index, employing both the Scoring Approach and Promethee-II methods, offers greater consistency than the IFCI index. Additionally, it underscores the importance of incorporating the new variables introduced in the study into the index. Research limitations/implications Indices are important for analysing where a country stands in comparison to others, measuring if the country has achieved its aims, and determining the necessary areas for achieving its targets. This study determines the relative state of countries with their scores, which are generated by computing the weights of 20 variables for 48 countries. Practical implications The Islamic Finance Country Index (IFCI) in 2011 was developed with the Islamic Banking and Finance (IBF) conditions of the countries and analyzes the rankings of countries in terms of their leading positions in the Islamic finance sector. Originality/value Since the calculations applied in the Global Islamic Finance report are not reflected in the annual report in detail, a new approach has been applied to determine the accuracy of the IFCI study and to detail the method they have done more objectively. The findings will also assist countries in developing a framework for the full growth of risk-sharing financing, and hence Islamic finance, in their participating countries.