It is not just literacy, but democratic institutions and personal freedom that lag in muslim majority countries. Hopefully that is changing, my understanding is there are large and growing grassroots movements in many muslim countries calling for civil rights, women's rights and other freedoms. The recent events in Iran are a good example, but there are tons of movements in places like Kuwait and Saudi Arabia too.
http://www.freedomhouse.org/template.cfm?page=70&release=101Of the world's 192 countries, 121 are electoral democracies. However, only 11 of the 47 nations (23 percent) with an Islamic majority have democratically elected governments. In the non-Islamic world, which comprises 145 states, 110 are electoral democracies (75 percent). Therefore, a non-Islamic state is over three times more likely to be democratic than an Islamic state. None of the 16 Arab states of the Middle East and North Africa is a democracy.
In addition to a democracy divide, there is a dramatic freedom deficit between majority Islamic countries and the rest of the world. Of the states with an Islamic majority, only one, Mali, is rated Free. Eighteen are rated Partly Free, and 28 are considered Not Free. By contrast, in the non-Islamic world, 85 countries are Free, 40 are Partly Free, and 20 are Not Free.
The gap in freedom has only widened over the last twenty years. While every other region of the world has registered significant gains for democracy and freedom, the countries of the Islamic world have experienced a significant increase in repression.
There are, however, bright spots. This year's analysis does not imply an inherent incompatibility between the Islamic world and democratic values. Democratically constituted governments, such as those in India, Bangladesh, Indonesia, Nigeria, and Turkey, govern countries with large Muslim populations. Indeed, today, the majority of the world's Muslims live in electoral democracies. In Bahrain, political reforms were begun after men and women voted in a referendum. In Iran, a discernible democratic ferment is challenging the restrictive measures imposed by the ruling clerics.
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For the people who will flame us for pointing out these facts about muslim countries, I should point out that 60-80 years ago Christian majority countries were the most repressive on earth. Hitler's Germany, the Soviet union under Stalin, Italy under Mussolini, Spain under Franco, the KKK in the US in the 1920s and most of central/south america was dictatorships. Now most of these countries are the most free on earth.