Infrastructure Financing through Islamic
Finance in the Islamic Countries
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carbon economy. During the year beginning in August 2017 when GIG was formed, the
institution arranged for investments of over GBP 1.6 billion for different projects, which led to
the generation of 84,941 GWh of renewal energy, avoiding 17,190 kt of CO 2 emissions and
15,652 kl of waste in landfills.74 GIG has made investments in green energy infrastructure
beyond the UK and is planning to expand its activities to other regions such as Europe, North
America and Asia.
4.6.6. Conclusion and Recommendations
Being a developed economy, the UK has a relatively well-built infrastructure. However, moving
forward, the existing infrastructure has to be upgraded and new infrastructure has to be
added. The estimates show that the transportation sector may face significant funding gaps in
the next couple of decades. Although the Islamic financial industry in the country is relatively
small, there have been a few cases in which the Islamic financial institutions have funded
infrastructure projects. The over subscription of the sovereign sukuk issued in 2014 indicates
the potential of using the instrument to raise funds for infrastructure investments.
A key feature of the infrastructure financing provided by the Islamic financial sector is that the
funds are sourced from overseas investors. Thus, Islamic finance provides an alternative
source for raising funds for infrastructure projects in the UK, both in terms of direct financing
by Islamic financial institutions and by issuing sukuk.
The issues and recommendations to further enhance the role of Islamic finance in
infrastructure development in UK are presented in Table 4.6.3.
Table 4.6. 3 Issues and Policy Recommendations: United Kingdom
Issues Recommendations Implemented by
Legal and Regulatory Regimes
 The financial laws and regulations in
the UK are governed by the EU legal
and regulatory framework. The
government has changed the tax laws
and regulations to level the playing
field.
 Guarantee is provided by the UK
Guarantee Scheme for infrastructure
projects.
 Take steps on tax related issues
arising in applying Islamic finance in
infrastructure projects to level the
playing field.
 Extend the guarantee to cover
Islamic financing structures to create
incentives for Islamic banks to
finance projects.
 Relevant government
ministry
 UK Guarantee Scheme
Islamic Financial Institutions
 It becomes difficult for Islamic banks
to participate in infrastructure projects
given their smaller size.
 The Islamic nonbank financial
institutions in the UK are mainly
investment banks, the financial
institutions such as takaful and
pension funds are non-existent.
 Increase the participation of Islamic
banks in project financing through
syndicated structures with other
conventional banks.
 Increase the contribution of Islamic
investment banks in investments in
infrastructure projects.
 Islamic banks and
conventional banks
 Islamic nonbank
financial institutions
74