Islamic model of infrastructure project financing in Islamic Finance

Abstract

Based on philosophy of sharing risk the BOT model of infrastructure projects financing is a natural fit for Islamic finance. The asset-backed nature of Islamic finance makes it more appropriate for fulfilling massive infrastructure project investments. Moreover, Islamic finance promotes social and economic development by creating real assets, not just by generating transactions that are merely financial.

In this context, this article briefly highlights the philosophy of development in Islamic economic system, as well as throws lights on the growing new trend of mobilizing Islamic finance in BOT contracts for Infrastructure projects globally and locally, in Pakistan and other countries as well. An estimate of global infrastructure needs has been studied in the light of some steamed reports. The potential of Islamic finance, and its flexible building blocks and instruments has been described along with their practical methods, to present an alternative model of Islamic BOT project financing. Some  proposed modes has presented in the end that may be applicable to mobilize Islamic finance in Infrastructure projects, concluding that a wide variety of Islamic finance structures are available to provide sufficient flexibility to practitioners to select appropriate financing vehicles for establishing a system of  financing infrastructure projects in developing countries like Pakistan and Afghanistan etc.