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Islamic Project Finance and Private Funding Schemes

  • Rodney Wilson

    (University of Durham)

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    As governments find it increasingly difficult to finance major projects, private sector companies are becoming involved in electricity generation, telecommunications expansion and infrastructure provision including toll roads, ports and airports. From an Islamic perspective there is no objection to such private provision, indeed the participatory nature of the involvement is welcome, but there are Shar¬cah compliance issues. Recourse to borrowing on the basis of rib® is har®m and Third World debt crisis of the 1980s illustrated the perils of such an approach, as has the more recent Asian financial crisis. The adoption of Islamic financing techniques such as istisn®’ can avoid such difficulties. Proper project evaluation is needed for such financing to be successful, and decision makers require good information. Discounting of future income is seen as legitimate by Islamic economists, as such techniques can be used for the calculation of social rates of return in Muslim societies.

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    File URL: http://www.iiu.edu.my/enmjournal/vol6no2.pdf
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    Article provided by IIUM Journal of Economis and Management in its journal IIUM Journal of Economics and Management.

    Volume (Year): 6 (1998)
    Issue (Month): 2 (June)
    Pages: 41-60

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    Handle: RePEc:ije:journl:v:6:y:1998:i:2:p:41-60
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    1. Bencivenga, V.R. & Smith, B.D., 1988. "Financial Intermediation And Endogenous Growth," RCER Working Papers 124, University of Rochester - Center for Economic Research (RCER).
    2. Khan, Mohsin S & Mirakhor, Abbas, 1990. "Islamic Banking: Experiences in the Islamic Republic of Iran and in Pakistan," Economic Development and Cultural Change, University of Chicago Press, vol. 38(2), pages 353-75, January.
    3. Adam B. Elhiraika, 1996. "Risk-Sharing And The Supply Of Agricultural Credit: A Case Study Of Islamic Finance In Sudan," Journal of Agricultural Economics, Wiley Blackwell, vol. 47(1-4), pages 390-402.
    4. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
    5. Abbas Mirakhor & Mohsin S. Khan, 1991. "Islamic Banking," IMF Working Papers 91/88, International Monetary Fund.
    6. Demirguc-Kunt, Ash & Levine, Ross, 1996. "Stock Market Development and Financial Intermediaries: Stylized Facts," World Bank Economic Review, World Bank Group, vol. 10(2), pages 291-321, May.
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