Infrastructure Financing through Islamic
Finance in the Islamic Countries
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been used to fund these projects. In Sudan, the government regularly issues various sukuk
every year. The Government Investment Sukuk (Sarh) is issued by the Ministry of Finance and
National Economy (MFNE) to finance infrastructure projects in the various states of Sudan. In
Nigeria, a sovereign sukuk raised funds for the government for building 25 priority roads
around the country and a subnational sukuk financed the construction of schools.
5.3.2. Infrastructure Related GLCs
While most of the infrastructure investments in Saudi Arabia and Sudan in the recent past have
been carried out by the government, GLCs have played an important role in some countries to
provide certain infrastructure services. For example, in Malaysia GLCs play an important role
in the infrastructure sector with estimates that they provide 93% of the utilities and 80% of
transportation and warehousing. In the telecommunications sector, Sudatel in Sudan, which is
60% owned by the government, was established as one of the first SOEs to provide
telecommunications and internet services. Some GLCs have raised funds using sukuk to invest
in the infrastructure sector. For example, In Indonesia, the Ministry of SOE has tapped into
Islamic finance to raise funds for some GLC schemes with the National Electricity Company
(PLN) raising 40% of IDR 16.3 trillion (USD11.6 billion) financing by issuing sukuk.
5.3.3. Government-Linked Investment Companies (GLICs)
GLICs are national-level public companies and funds that provide financing for infrastructure
projects. The GLICs support infrastructure development in different ways. First, they provide
the capital to establish infrastructure related GLCs. For example, in Malaysia, Permodalan
Nasional Bhd, Kumpulan Wang Persaraan and Lembaga Tabung Haji own significant stakes in
Axiata Group Berhad, a key provider of mobile telecommunications. Similarly, shareholders of
Tenaga Nasional Berhad, the dominant player in the electricity sector, include Permodalan
Nasional Bhd, Kumpulan Wang Persaraan and Lembaga Tabung Haji. The second type of GLIC
can be established to raise funds for infrastructure projects. An example of this type of GLIC is
the infrastructure financing entity DanaInfra Nasional Berhad in Malaysia which is wholly-
owned by the Ministry of Finance. The objective of DanaInfra is to raise funds for the
construction of infrastructure projects.
While some of the GLICs are partly Shariah-compliant, others are wholly Islamic. For example,
Lembaga Tabung Haji is Shariah-compliant. DanaInfra raised a total of RM2.5 billion (USD
789.14 million) by selling different series of sukuk to partly cover the total cost of the USD 6.2
billion Klang Valley Mass Rapid Transit (MRT) Project. In the UK, the government established
the Green Investment Bank in 2012 to provide financing for sustainable and green energy-
related infrastructure projects. The bank was acquired by Macquarie Group and renamed the
Green Investment Group in 2017.
Given the huge demands and financing gaps in the infrastructure sector in different OIC
member countries, one option to increase the role of Islamic finance in this sector would be to
establish a national level Islamic Investment Bank. While the initiative to create the bank can
be taken by the government and other GLICs, once established funds can be raised by issuing
sukuk and seeking investments from private sector institutional investors. Furthermore, the
bank can take initiatives to organize syndicated financing by pooling funds from other Islamic
financial institutions to finance infrastructure projects.