Infrastructure Financing through Islamic
Finance in the Islamic Countries
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and impartial advice to the government and carry out an objective analysis of the future long-
term needs and pressing issues related to infrastructure in the UK. NIC prepared the National
Infrastructure Assessment examining the infrastructures needs for the country for the next 20
years and identified major projects with strategic significance that need to be undertaken.
While the proposals of the NIC provide objective, non-political guidelines on the infrastructure
that needs to be undertaken with a long term perspective, the government is the one that
ultimately decides on the projects that are eventually delivered.
The second key institution, the Infrastructure and Projects Authority (IPA), was established in
2016 by merging Infrastructure UK and Major Projects Authority. Reporting to HM Treasury
and the Cabinet Office ministers, IPA serves as the centre of excellence for project finance,
providing expert support. The roles of IPA include tracking and reporting on the progress of
infrastructure projects, overseeing the Private Finance 2 (PF2) policy, developing the
commercial and finance capabilities, and delivering the UK Guarantee scheme.
The key function of IPA includes helping implement the projects identified in long-term plans
successfully. It prepares the National Infrastructure Delivery Plan (NIDP) in which the
infrastructure projects that are being implemented in the medium term are detailed. The
infrastructure projects selected in NIDP 2016-2021 are nationally significant, making a
significant contribution to the government’s strategic objects and having the potential to drive
private investment and economic growth.
The government has taken a number of steps to promote the role of the private sector in
infrastructure development. Other than providing a sound regulatory framework, the
government issued ‘PF2: A User Guide’ and a format of standardized contracts to have a clear
structure for private sector participation under PF2.70 The standardized contract that can be
used for investments in infrastructure projects reduces the costs of transactions and mitigates
the legal ambiguities in complex transactions.
The government initiated the UK Guarantee Scheme (UKGS) that provides guarantees for debt
of up to GBP 40 billion to support private sector investments in infrastructure projects of
national importance (IPA 2016). Since the guarantee is given by government upgrades the
financing as sovereign-backed debt, the funds can be raised in more favourable terms. The
Scheme has already benefited nine projects covering different sectors and is expected to
continue until 2026 (Richards et. al 2018).
The government has also taken steps to encourage institutional investors to contribute to
infrastructure financing. Under the advisory role of HM Treasury, the National Association of
Pension Funds and Pension Protection Fund launched the Pensions Infrastructure Platform
(PIP) in 2012. A signatory of UN Principles for Responsible Investment, PIP plans to invest GBP
2 billion in the infrastructure sector in a sustainable manner. Similarly, the Association of
British Insurers set up the Insurers’ Infrastructure Investment Forum to have a better link
with the government to increase investments in infrastructure projects. Insurers were
committed to invest GBP 25 billion with partners over five years starting in 2013 (IPA 2016).
70 See
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