Infrastructure Financing through Islamic
Finance in the Islamic Countries
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Based on the results of the case study, the issues arising and recommendations are suggested
in Table 4.2.4 to further enhance the role of Islamic finance in infrastructure development in
Malaysia.
Table 4.2. 4: Issues and Policy Recommendations: Malaysia
Issues Recommendations Implemented by
Infrastructure Related Strategies and Policies
 PPP projects and contracts are
novel and complex.
 Although Danajamin in Malaysia
provides guarantees for corporate
sukuk, there is a need to expand
the guarantee to other project-
specific risks to encourage private
sector participation in
infrastructure investments.
 Develop Shariah-compliant contract
templates for different types of PPP
projects that help stakeholders to
structure contracts.
 Providing Shariah-compliant guarantees
of the implementation of PPP contracts
and making takaful cover political risks
and partial credit risks.
 PPP Unit under the
Prime Minister’s
Office.
 Danajamin
 Relevant public bodies
 Private sector
insurance/takaful
companies
Legal and Regulatory Regimes
 The relatively higher capital
requirements for long-term
investments inhibit Islamic banks
from investing in the
infrastructure sector.
 Balance financial stability objectives with
lowering the capital requirements for
investments in long-term projects to
encourage the greater involvement of
Islamic banks in infrastructure financing.
 Banking regulatory
authority (BNM)
Government and Public Bodies
 Dana Infra was established to
raise funds for infrastructure
projects. Its facilitative role can be
further expanded.
 The scope of Dana Infra can be further
expanded by creating a fund to encourage
the pooling of resources from different
institutional and retail investors in
infrastructure projects.
 Dana Infra can also provide advice on the
issuance of sukuk and develop templates
for issuing sukuk for infrastructure
projects
 Dana Infra or a new
GLIC
Islamic Financial Institutions
 The direct investments in the
infrastructure sector by Islamic
banks in Malaysia are small.
 The contribution of the Islamic
nonbank financial institutions in
Malaysia in the infrastructure
sector is relatively small due to
their small size.
 Increase the share of investments in
infrastructure projects by Islamic banks
by expanding the size of investment
accounts which can be used for longer
term investments.
 Create incentives to increase the share of
the takaful sector in the overall insurance
industry and share of Shariah-compliant
components in the pension funds and
sovereign wealth funds.
 Islamic banks
 Regulatory authorities
 Islamic nonbank
financial institutions
Islamic Capital Markets
 Islamic funds and platforms for
infrastructure investments can
potentially increase the share of
Islamic finance in developing
infrastructure projects.
 Develop Islamic funds and platforms for
infrastructure investments.
 Relevant market
players such as
Islamic investment
banks