Proceedings of the 12th Meeting of the COMCEC
Financial Cooperation Working Group
23
8.2 Private Sector Perspective on Infrastructure Financing through
Islamic Finance
Mr. Ragıp Ali KILINC, Head of Project and Structured Finance of Kuveyt Turk Katılım Bankası
A.Ş., made a presentation on the private sector perspective on infrastructure financing through
Islamic finance. He commenced his presentation from the synopsis of Kuveyt Turk.
Mr. KILINC summarized three different examples of infrastructure financing that they
participated. After this brief overview, he addressed the difficulties encountered under four
main headings such as “Limited Islamic Financing Products”, “Limited Time Span for Financial
Close”, “Financial Risks” and “Legal and Regulatory Framework”.
Mr. KILINC explained the limitation of Islamic finance product for financing the infrastructure
projects. He stated that there are only three products (Tawarruk, Ijaraj, Parallel Istisna) they
can use to finance the infrastructure projects, however, those products also have different
challenges in themselves. For example, Ijarah has hesitation over pari passu sharing of
securities. When you consider to use Parallel Istisna, you have to be involved in financing with
a fixed rate. Tawarruk or Commodity Murabaha is not a highly preferred product in Kuveyt
Turk because of resemblance to conventional banking.
Secondly, Mr. KILINC informed the participants that all PPP Projects’ financial closure has to be
completed within a very short period which tights their internal evaluation timeline. He also
said that determining a project and allocating the credit line requires some times for need of
financial and legal due diligence and receiving Board of Directors approval due to facility lines.
However, most of the project has to be closed financially within a few months.
Mr. KILINC underlined that as another challenge, which is related to financial risks, exposure
to currency risk is one of the most critical features of infrastructure financing. However, there
are ways to minimize this currency risk by hedging mechanism. Mr. KILINC stated that a
solution for this issue is enhancing the capacity of capital markets to supply long term debt
capital in form infrastructure Sukuk which is critical for the financing of infrastructure projects
with long term assets.