Infrastructure Financing through Islamic
Finance in the Islamic Countries
136
Chart 4.4. 10: IDB Project Financing in Saudi Arabia (USD million)
Source:
4.4.5.6. Case Studies
Case Study: Prince Mohammad Bin Abdul-Aziz International Airport (Madinah airport)
Madinah is a major hub for pilgrims and a designated centre for the knowledge-based industry
in the country (World . Prince Mohammed Bin Abdulaziz International Airport,
popularly known as Madinah airport, is an international airport that serves the Madinah
region, and, because of the strategic importance of the region, the airport alone cannot
adequately cater for the growing numbers of passengers flying that route, mainly due to
inadequate infrastructure. Therefore, Saudi Arabia’s General Authority of Civil Aviation (GACA)
initiated a project to attract investors using a PPP model to rehabilitate, expand, modernize
and operate the airport to international standards (World Bank, 2017). In addition, the project
was designed to fulfil two objectives, namely to introduce private sector expertise and to
develop a stable revenue stream for the government.
The target of the project was to expand the capacity of the airport from 5 million to 8 million
passengers per year at the initial phase (Madinah . The projection was to
further expand it to 16 million passengers per year at the later phase. After the bidding, the
TIBAH, a consortium comprising of TAV Airports Holding (Turkey), Al Rajhi Holding (KSA) and
Saudi Oger Ltd (KSA), won the concession for 25 years to rehabilitate, expand and operate the
entire airport (Madinah . The contract was awarded and signed in October 2011
with the promise to invest $1.4 billion to build and expand a new terminal facility that could
accommodate around 8 million passengers per annum (MPPA) by 2015 and 18 MPPA by the
end of the concession period.
To finance the project, two modes of Islamic finance were used for the two stages involved in
the project. The stages of the project are the construction and operation stage. In the
construction stage, Istisna was used where a special purpose vehicle (SPV) transferred some of
the rights in the build-transfer-operate (BTO) concession agreement to the TIBAH consortium,
the financiers of the project. In the second stage, the TIBAH consortium transferred the
ownership of the asset back to the SPV gradually based on rental payments using a lease
119.5 1,931.7
3
86
0
20
40
60
80
100
0
500
1,000
1,500
2,000
2,500
Total Project Financing
2016+
Total Project Financing
Since Inception (1975-
2016)
No. of projects USD (Million)
US mill. No.