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Proceedings of the 12th Meeting of the COMCEC

Financial Cooperation Working Group


aspect relates to how the private party is paid in terms of fees/tariffs from service users or

government or from both.

Although various types of PPP contracts can be structured depending on the functions that the

private sector performs, Prof. AHMED asserted that the focus on the research report was on

the ‘finance’ component. He then identified different sources of financing that can be broadly

classified into dimensions of domestic/international and public/private. Other than

categorizing sources of financing as domestic-public, domestic-private, international-public,

and international-private, he also identified public-private partnerships and blended finance

that mixes various types of financing. Prof. AHMED indicated that the bulk of the infrastructure

funding (close to 60%) comes from government and the private sector contributes around

23%, followed by national development banks (10%) and overseas sources (6%). The

objective of the research was to focus on expanding the private sector component of

infrastructure financing by using Islamic finance.

Prof. AHMED showed that total assets under management by different institutional investors

globally was valued at USD 200 trillion in 2016. Banks held almost one-third (33.5%) of the

global financial assets followed by investment companies that held 24.2% of the assets. Asset

holdings of other institutional investors include insurance companies & private pensions

(22.1%), public pensions and superannuation plans (9.1%), sovereign wealth funds (5.3%),

infrastructure operators and developers (2.8%), infrastructure & private equity funds (2.3%)

and endowments and foundations (0.8%). He then presented the investment horizon and risk

appetite of different financial institutions as shown in the table below:


Investment Horizon

Risk Appetite

Commercial Banks

Short term

Low to medium

Nonlife insurance

Short term


Investment Company

Short to medium term Depends on funds mandates






Long term


Public pension

Long term


Sovereign wealth funds

Long term

Medium to high

Endowments and foundations

Long term


Prof. AHMED asserted that although a significant percentage of the financial assets are held by

banks and investment companies, their contribution to infrastructure sector could be limited

due to their investment horizon and risk appetite. He continued that given the investment

horizon and risk appetite, the financial institutions that are most suitable to invest in

infrastructure projects would be life insurance and private pensions, public pensions,

sovereign wealth funds and endowments and foundations. Data from infrastructure

investment show that the bulk of global investments in infrastructure comes from corporates

(50%) followed by infrastructure funds and investment firms (32%) and pension funds and

sovereign wealth funds contributing 5% each.

Next, Prof. AHMED identified five factors that affect the private financing of infrastructure

projects which are listed below.