Compliance is not transformation: The substance gap in Islamic finance and the halal economy

Islamic finance and the halal economy are governed by two parallel certification regimes that have matured institutionally while under-delivering on their developmental promises. This commentary argues that both regimes share a single design flaw: they certify form, contractual structure in finance, ingredient, and process provenance in goods, while remaining largely silent on the outcome. The evidence was consistent across both domains. Indonesian Islamic banking assets reached IDR 1,061 trillion by March 2026, growing 10.49 percent year on year, yet the sector's share of banking assets has remained close to 7 percent for more than a decade; global sukuk issuance reached a record USD 264.8 billion in 2025, of which sustainable instruments accounted for only USD 21.5 billion; and Indonesia has certified over 13 million products as halal, overwhelmingly from micro and small enterprises, while extending mandatory enforcement to October 2026. The commentary makes three arguments: that the empirical literature comparing Islamic and conventional banks has been measuring the wrong dependent variable; that the market share plateau is a symptom of the form–substance gap rather than a marketing problem; and that halal certification now functions simultaneously as a religious institution, consumer protection instrument, and trade-governance device, with the three functions in unacknowledged tension. A measurement agenda was proposed.