Sustainable Development and Infrastructure An Islamic Finance Perspective

Most books on Islamic finance and development issues are written from an academic perspective. Although academic reflection is key for future direction, dissatisfaction with previous development efforts, as evidenced by their lack of sustainability, suggests the need for a different type of review. Development work is complex and requires a detailed and transparent approach in order to ensure a cogent resolution for potential long-term issues. Each intervention area requires specific elaboration for meaningful impact. The perfect solution for one sector might be detrimental for another.

Islamic finance, with its strict Riba restrictions, rules, and other checks and balances, is a good fit for infrastructure development in pursuit of sustainable development. When it comes to sustainable development, this book argues, Islamic finance has the tools to intervene for maximum impact. However, the issue of sustainability is not only related to Islamic finance; more policy discourse is needed. This requires guidance from the principles of Islamic economics, as well. This book discusses infrastructure development vis-à-vis sustainable development, drawn from decades of real-life development banking experience, and proposes impactful intervention methods based on wisdom from Islamic economics and finance.

1 Islamic Finance for Sustainable Development Goals

1.1  Commercial Resources for Islamic Microfinance and Economic Infrastructure Development

1.2  Grants for Hunger and Wealth Redistribution

1.3  Concessional Resources for Social Infrastructure Development

1.4  The Narrative

2     Islamic versus Conventional Infrastructure Project Finance vis-à-vis Time Overrun Issues

2.1  Project Cycle of MDBs

2.2  Comparison of Disbursement and Procurement Processes

2.3  Comparison of Legal Agreements, Collateral, and Default

2.4  Determinant of Time Overrun

3     Identifying Infrastructure Sectors for Islamic Public–Private Partnership Projects

3.1  Islamic PPPs

3.2  Defining Success Factors

3.3  PPP toward Sustainable Outcome

4     Sustainable Islamic SME Financing

4.1  The Role of SMEs in Economic Infrastructure and SDGs

4.1.1        Funding Gap

4.1.2        Source of Financing

4.1.3        SME Characteristics and Access to Funding

4.2  Islamic Financial Products and Product Development for SMEs

4.3  Resource Mobilization

5     Economic Empowerment, Zakat, Waqf, and Social Infrastructure

5.1  Categorizing Islamic Charitable Spending

5.2  The Role and Specifications of Zakat

5.3  The Role and Specifications of Waqf

6     Islamic Finance Strife: Risk Management, Regulation, and Supervision

6.1  Late Payment Charges

6.2  Working Capital Finance

6.3  Treasury, Fund Management, and Investment Practices

7     Islamic Approach toward Energy Sector Infrastructure Development

7.1  Setting the Parameters to Evaluating New Business Models

7.2  Traditional Reform Proposals for the Energy Sector

7.3  Case of “Unlocking Energy Access Finance through Crowdfunding”

7.3.1        The Debt Seniority Feature to Attract More Resources

7.4  Evaluation of the Emerging Solution

7.4.1        Empowerment

7.4.2        Sustainability: Maintenance, Affordability, and Resilience

7.4.3        Scale-up: Replicability and Resource Mobilization

8     Islamic Financial Product Development in the Context of Education and Health

8.1  Setting the Stage for Maqasid

8.2  From Merchandise Trade Finance to Financing Trade in Services

8.3  Islamic Discouragement of Financing Services: Health and Education

9     Irrigation and Drainage

9.1  Trio of Performance Areas: Water Service Delivery, Organizational Resources, and Governance

9.2  Root Causes

9.3  Public–Private Partnership for Irrigation

9.4  Islamic Approach with Waqf Development

10  Identifying Equitable and Fitting Business Models for Infrastructure Projects

10.1         Sustainability

10.2         Resource Mobilization for Scale-Up

10.3         Economic Infrastructure and Resource Mobilization

10.4         Social Infrastructure and Resource Mobilization

10.5         Infrastructure Projects, SDGs, and Global Value Chain

Appendix A: Transaction Scheme for the Case of Unlocking Energy Access Finance through Crowdfunding

Appendix B: Irrigation and Drainage Water Management Performance Areas

Index