Abstract
Research on Islamic project financing in infrastructure conducted predominantly in Islamic countries and developed countries showed its many benefits. This particular research focuses on Indonesia. As a developing country with a majority of Muslim population, it is reasonable to expect that Islamic project financing may also be a suitable option for financing alternatives in Indonesian infrastructure development. This paper aims to identify the barriers to implementing Islamic financing for infrastructure project development. A Delphi study was conducted to gather the views and opinions of an expert panel. The study found that the main barriers to implementing Islamic project financing are a lack of understanding of the Islamic project financing concept, a resistance to using Islamic finance, and investors’ behavior and characteristics, such as a profit-oriented mind-set and risk avoidance, which might affect the infrastructure stakeholders’ preference for using a sharia-compliant scheme.
Highlights
Infrastructure plays an important role in supporting a nation’s economic growth and competitiveness
This paper aims to investigate the barrier to implementing Islamic financing for infrastructure project development
There are some possible issues that might hamper the implementation of Islamic project financing in infrastructure projects, namely a lack of understanding of concept and a resistance to its use
Summary
Infrastructure plays an important role in supporting a nation’s economic growth and competitiveness. It can be more beneficial to create infrastructure projects as investments, meaning that said infrastructure must be financially and economically feasible. Governments must consider which infrastructure projects are financially feasible and can be offered as infrastructure investments. Investors in health infrastructure projects in the UK have received reasonable returns from their investment [2]. It is beneficial if the scope of infrastructure development is focused on construction and expanding to investments. If the private sector is involved in infrastructure investment, more capital is generated, which in turn can reduce the pressure on government’s budget and allow it to be reallocated to non-financially feasible projects. Project financing is not new; its use has evolved from financing natural resources infrastructure projects to public infrastructure projects [3]
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