Proceedings of the 12th Meeting of the COMCEC
Financial Cooperation Working Group
14
Investment Certificates (Sarh) to finance infrastructure projects. Furthermore, Sudan Financial
Services Company Ltd. (SFSC) provides advisory services, designs and executes marketing
policy for the issuance of sukuk.
Islamic Social Sector: After asserting that Islamic social sector (zakat and waqf) can
contribute to providing certain social infrastructure services, Prof. Ahmed presented some
examples from the sample countries. In Malaysia and Saudi Arabia, waqf has been used to
provide medical services to the needy and in Indonesia BAZNAS and UNDP used zakat funds to
provide a Micro Hydro Power Plant to provide electricity to 803 households in four remote
villages.
Multilateral Development Institutions: Prof. Ahmed showed the contribution of Islamic
Development Bank in infrastructure projects in the sample countries since 2016. Indonesia
received the highest allocation of USD 836.3 million for 6 projects followed Saudi Arabia
receiving USD 119.5 million for 3 projects. Sudan got funding for 2 projects (USD 21.5 million)
and Nigeria for one project (USD 1.6 million).
The third part of the presentation covered Key Issues and Policy Recommendations. Prof.
Ahmed presented the key challenges and issues arising in financing infrastructure sector by
Islamic finance under the following heads:
Infrastructure Related Strategy and Policies: Prof. Ahmed asserted that infrastructure
needs and gaps are huge and there is a need to identify key projects and attract alternative
funding sources. Furthermore, long-term investments in projects are large with long gestation
periods which introduce various risks that inhibit investments. There may be a need for
guarantees to mitigate some of the risks.
Legal and Regulatory Framework: The issues that Prof. Ahmed identified included a stable
and supportive legal environment to mitigate risks and attract investments in infrastructure
projects. He also pointed out that infrastructure projects and PPP contracts are complex and
new to Islamic finance and there is a need for a sound legal/regulatory framework for PPPs.
Furthermore, the regulatory framework for capital requirements discourages banks from
investing in long-term projects.
Financial Institutions: Prof. Ahmed argued that investment by Islamic banking sector in long-
term infrastructure projects is small partly due to their short-term and liquid liabilities.
Furthermore, lack of underdeveloped money market instruments/markets increases liquidity
risks. He also stressed the need for a sound legal and contractual framework for Shariah
compliant syndicated financing to enable financing with other Islamic banks and conventional
banks. He pointed out that the Islamic nonbank financial institutions are not contributing to
infrastructure investments due to their small size.
Capital Markets: Although sukuk can be used to raise large amounts of funds from different
sources, Prof. Ahmed highlighted that their issuances are complex and costly. There is a need
to diversify sources of funds to meet the huge demand for infrastructure investments. Among
other, this can be done by using retail sukuk to raise funds from retail investors.
Islamic Social Sector: Prof. Ahmed argued that while traditional sources of Islamic social
finance (zakat, waqf and sadaqat) have huge potentials to provide social infrastructure
services, in most countries these are not utilized fully.
International Sources: Prof. Ahmed emphasized that Shariah compliant funds for
infrastructure sector from international sources are limited as IDB is the only multilateral