Previous Page  15 / 41 Next Page
Information
Show Menu
Previous Page 15 / 41 Next Page
Page Background

Proceedings of the 12th Meeting of the COMCEC

Financial Cooperation Working Group

11

4.

Lessons Learnt from the Selected Case Studies and the Policy

Options

Prof. Ahmed’s presentation on “Lessons Learnt from Selected Case Studies and the Policy

Options” covered Chapters 4, 5 and 6 of the research report. The presentation had three parts:

Background and Methodology; Country Case Studies—Results; and Key Issues and Policy

Recommendations.

After reminding about the huge infrastructure financing gap in the OIC member countries

amounting to USD 4.9 billion per member country per year expected during the period 2016-

2040, Prof. Ahmed reiterated the need for seeking alternative financing sources to fill the gap.

In this regards, one option that can be tapped into is Islamic finance which has over USD 2

trillion in assets globally. With key features of risk-sharing, direct linkages with the real

economy and ideological standing of ethical, social and legal ethos compatible with

infrastructure financing, he asserted that Islamic finance can potentially play an important role

in the development of infrastructure sector. Given this, the aims of the presentation were to

analyse the prospects and challenges facing infrastructure financing using Islamic finance in

selected OIC member countries and identify policy recommendations to enhance the role of

Islamic finance in promoting investments in infrastructure sector.

Next, Prof. Ahmed identified four criteria used to choose countries for the case studies. First,

ensuring regional diversification among three regions identified by OIC as Africa, Arab and

Asia. Second, countries were chosen to represent different levels of development in terms of

income group classifications of World Bank (i.e., low income, lower-middle income, higher-

middle income and higher income groups). Third criterion related to the diversity of size of the

Islamic financial industry. Finally, countries were chosen to represent diverse legal systems

(i.e., Islamic law, common law and civil law). Based on these criteria five OIC member countries

(Indonesia, Malaysia, Nigeria, Saudi Arabia and Sudan) and one non-OIC country (United

Kingdom) were chosen for the research. To analyse the contribution of Islamic finance in the

development of infrastructure, Prof. Ahmed identified eight themes that were examined for

each country which are shown below.

1.

Infrastructure Related Strategy and Policies

2.

Legal and Regulatory framework

3.

Government and Government Linked Companies

4.

Islamic Banks

5.

Islamic Nonbank Financial Institutions

6.

Islamic Capital Markets

7.

Islamic Social Sector

8.

Multilateral Development Institutions

The second part of the presentation covered the key results from the country case studies.

Prof. Ahmed started the section by showing the infrastructure financing needs and the size of

the Islamic financial sector in each country. The average investment needs per year for

infrastructure in Indonesia was estimated to be USD 68.5 billion and the size of the Islamic

financial sector was USD 73.8 billion. The Islamic banking sector accounted to USD 30.3 billion

and invested only USD 2.55 billion in the infrastructure sector. For Malaysia, the infrastructure

investment needs was estimated to be USD 18.4 billion per year and the size of the Islamic

financial sector was USD 398.8 billion. The Islamic banking sector is large with USD 204.4

billion in assets. However, only USD 8.95 billion was invested in infrastructure sector. The