Infrastructure Financing through Islamic
Finance in the Islamic Countries
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6.5. Concluding Remarks
The overall status of infrastructure in OIC member countries is relatively underdeveloped and
will need huge investments, particularly to achieve the SDGs. Under the current trends in
infrastructure investments, the estimates of deficits for the 13 OIC member countries listed in
the GIHUB database is USD 1.6 trillion during 2016-2040. Although traditionally infrastructure
development has been the responsibility of governments, their role in filling the gaps is
constrained due to budgetary restrictions and accumulated debt. The huge investments
needed in the infrastructure sector require tapping into alternative sources of funding. In this
regard, the private and non-profit sectors can play an important role in mobilizing resources
for the development of infrastructure projects. Since the Islamic financial industry is a
significant and growing sector in many OIC countries, this report explores the role that the
industry can play as an alternative source of funds to contribute to the development of the
infrastructure sector.
The country case studies show that the status of the infrastructure and the Islamic financial
industry varies across different countries. The results reveal that even though the Islamic
banking sector constitutes the largest sector of the industry, their contribution to
infrastructure projects is relatively small. This is partly due to the structure of their balance
sheets and also due to the regulatory regimes that discourage long-term investments. The
Islamic nonbank financial institutions sector is small which limits its contribution to
infrastructure projects. While the capital market can be a potentially good source of raising
funds, the country case studies show that the sukuk market is not developed in some
countries. The research also points out the role that Islamic social finance can play in providing
social infrastructure services to the poorer sections of the population. The international
sources of Shariah-compliant project financing are also few due to the limited capacity.
Given the investment gaps to develop the infrastructure sector and the limited Shariah-
compliant resources used, this report provides some policy recommendations that can
enhance the role of Islamic finance in the filling of the gap and lead to the development of the
infrastructure sector. The key policy recommendations identified in the study can be classified
into three broad categories. First, there are suggestions of creating specialized Islamic financial
institutions specifically focusing on infrastructure sectors. These would include establishing
national level and international Islamic Infrastructure Banks. Second, there is a need to come
up with innovative instruments and models to raise funds for infrastructure projects. These
include restricted investment accounts in Islamic banks, retail sukuk in Islamic capital
markets, and novel models that can be used in Islamic social finance. Finally, there is a need to
develop supportive institutions that can provide technical assistance and advisory services on
both PPP and Islamic financing for long-term projects. Among others, these institutions could
provide advisory services on PPP contracts and implementation, develop standardized
contracts for project financing, and provide advice and assistance for sukuk issuance.