Proceedings of the 12th Meeting of the COMCEC
Financial Cooperation Working Group
16
infrastructure services. Zakat institutions, waqf institutions, government bodies and
international organizations could implement the policy.
8. Establish an International Islamic Infrastructure Bank (IIIB): The rationale for
this recommendation is that IDB is the only Islamic MDB and has mandates beyond
project financing. Since investment needs for infrastructure sector of member
countries is large, IIIB can mobilize funds from different international sources. IIIB can
be established by multilateral organizations and/or large private sector organizations
can take the lead. OIC member countries can provide the initial capital for establishing
the IIIB.
9. Build capacity and human capital for implementing Islamic infrastructure
financing: Prof. Ahmed explained that PPP projects are multifaceted and new for
many Islamic financial institutions and knowledge gap exists on how Islamic finance
can be used for PPP projects. The proposal can be implemented by multilateral
development organizations such as IDB, COMCEC or the proposed IIIB by providing
the technical assistance for training professionals of Islamic financial sector.
Question(s) and Comment(s)
Question: What is the role of Islamic syndication in enhancing project financing?
Answer: Prof. Ahmed mentioned that most Islamic banks that invest in infrastructure projects
do so by using syndication given their small sizes and large investment amounts needed. In
many cases, the syndication involves conventional banks also. In these cases there are issues
that need to be resolved contractually so the terms and conditions related to risks and returns
for both Islamic and conventional investors are similar.
Question: There is a need for skilled people who have knowledge about project financing
which may be lacking in Islamic finance.
Answer: Prof. Ahmed acknowledged that project financing is complex that requires skills and
knowledge that are scant. He pointed out that on top of the complexities that are present in
conventional project financing, in Islamic project finance there is another layer of issues that
arise due to requirements of Shariah compliance. That is why one of the recommendations of
the study is to enhance capacity and human capital for implementing Islamic infrastructure
financing.
Question: What is the impact of infrastructure on jobs and environment?
Answer: Prof. Ahmed reiterated that infrastructure is useful input for growth and
development of economies. While better infrastructure has the potential to create jobs both
directly and indirectly through growth, care has to be taken to deal with the negative
externalities that projects can create. For example, when World Bank invests in projects, they
not only do due diligence in terms of risks and returns but also do environmental and social
screening.
Question: A key issue about investments is to monitor them. How would this be done in
infrastructure projects?
Answer: Prof. Ahmed responded that the issue about monitoring will depend on the type of
contract used. In case of debt, credit risk of financiers is usually secured by some sort of
guarantees and the need to monitor performance is less. However, for equity providers the
returns depend on the performance of the assets and there will be more incentives to monitor
the assets and the operations.