Proceedings of the 12th Meeting of the COMCEC
Financial Cooperation Working Group
13
specific laws for Islamic finance. Sudan’s whole financial sector is Islamic and the financial laws
support the industry.
Government Linked Companies: Prof. Ahmed presented different roles that various
government-linked companies play in supporting the infrastructure sector in case studies
countries. In Malaysia government-linked investment companies (GLICs) provide financing for
infrastructure projects. For example, Lembaga Tabung Haji, a specialized hajj savings fund
owns significant stakes in Axiata Group Berhad (provider of mobile telecommunications).
Furthermore, some GLICs help raise funds for infrastructure projects. Examples include
DanaInfra Nasional Berhad (wholly-owned by the Ministry of Finance) in Malaysia which has
issued sukuk for construction of infrastructure projects and PT Sarana Multi Infrastructure (PT
SMI) in Indonesia provides funding for infrastructure projects in the form of equity, debt and
securities. Prof. Ahmed then identified other GLCs that provide support services which include
Infrastructure Guarantee Fund (IIGF) in Indonesia providing guarantees for fulfilment of the
contractual obligations in PPP projects and Danajamin Nasional Berhad in Malaysia that
provides guarantees and insurance for bonds and sukuk to investments in infrastructure
sector.
Islamic Banks: Prof. Ahmed showed the contribution of Islamic banks in the infrastructure
sectors and investments in sukuk in the sample countries. Islamic banks in Indonesia invested
8.4% of their assets in the infrastructure sectors and their investments in sukuk were 9%.
Malaysian Islamic banks invested 13.1% in sukuk and only 4.38% in infrastructure. Nigerian
Islamic banks did not invest in the infrastructure sector due to their small size, but invested
6.8% of their assets in sukuk. The investments in infrastructure by Islamic banks in Saudi
Arabia and Sudan were 3.7% and 3.59% respectively and investments in sukuk in these
countries accounted to 8.6% and 7% respectively. Prof. Ahmed concluded that direct financing
in infrastructure sector by Islamic banks appears to be lower than investments in sukuk. This
may be due to the short-term and liquid liability structure of Islamic banks that limits
investments in long-term illiquid infrastructure assets.
Islamic Nonbank Financial Institutions: Prof. Ahmed affirmed that takaful sectors and
Shariah compliant component of pension funds and sovereign wealth funds in the sample
countries was relatively small. For example, the takaful sector Sudan does not have any
investments in infrastructure sector. In Malaysia 45% of AUM (RM266.5 bn.) of largest
retirement fund EPF was Shariah-compliant and in Saudi Arabia the sovereign wealth fund
Public Investment Fund (PIF) invests in many infrastructure-related companies (power, water
utility and sewerage, telecommunications and transportation sectors).
Islamic Capital Markets: Prof. Ahmed presented the relative size of the sukuk markets in the
countries included in the study. Malaysia dominates the global sukuk market with 32.9% of the
sovereign sukuk and 60.6% of the corporate sukuk issued in the country. While Saudi Arabia
accounts for the largest sovereign sukuk issuance accounting to 38.8% of the global issuances,
the corporate sukuk issuances in the country are relatively small at 3.2%. Indonesia accounts
to 6.6% of global sovereign sukuk issuances and 2.8% of the corporate sukuks.
After showing the overall size of the sukuk issuances, Prof. Ahmed presented some of the ways
in which sukuk is used to raise funds for infrastructure projects by both the government and
corporates. In Indonesia government and infrastructure entities issued sukuk for budgets and
infrastructure projects. Malaysia has extensively used sukuk for infrastructure projects. In
Nigeria USD 289.33 million raised by issuing two sukuk by federal and state governments (for
roads and education). The government in Saudi Arabia raised USD 19.2 billion domestically in
2017 by issuing bonds and sukuk to cover budgetary deficits. Sudan issues Government