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Islamic finance for infrastructure development: Concepts and evidence

Author

Listed:
  • Aliyu, Shehu Usman Rano
  • Ibrahim, Abdul-Jalil

Abstract

Islamic finance embodies a principled approach to investment and financing that prioritizes risk sharing, ethical considerations, social welfare, and financial inclusion. This chapter delves into the nature of infrastructure financing within the Islamic financial framework, exploring the unique characteristics that distinguish it from conventional financing methods. It elucidates the various instruments utilized in structuring such financing, such as Murabaha, Ijarah, Istisna'a, Musharakah, Mudharabah, and a combination of contracts such as Sukuk, and assesses their applicability and effectiveness in infrastructure projects financing. This chapter adopts both qualitative and quantitative methods of reasoning and utilizes content analysis to explore the potential role of Islamic finance in infrastructure development or project financing. Through an examination of case studies, this research highlights practical examples of how Islamic finance has been employed in infrastructure financing across different regions and sectors. Furthermore, the paper addresses the challenges faced in this field, including regulatory, legal, and market perception issues, while also discussing the prospects and potential for growth and innovation in Islamic infrastructure financing. Some policy recommendations are also provided to unlock the potential of Islamic finance in infrastructure development.

Suggested Citation

  • Aliyu, Shehu Usman Rano & Ibrahim, Abdul-Jalil, 2023. "Islamic finance for infrastructure development: Concepts and evidence," MPRA Paper 126473, University Library of Munich, Germany, revised 14 Mar 2025.
    • Handle: RePEc:pra:mprapa:126473
    as

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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • P4 - Political Economy and Comparative Economic Systems - - Other Economic Systems
    • P45 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - International Linkages

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