Monday 08, May 2017 by William Mullally

Securities Commission Malaysia and World Bank discuss greater role of Islamic infrastructure finance

Islamic finance can play a greater role in infrastructure financing via Public Private Partnerships (PPP) to facilitate more sustainable developments, said Securities Commission Malaysia (SC) and World Bank Group at a joint conference held at the SC’s headquarters at Kuala Lumpur.

Themed “Islamic Finance and Public-Private Partnerships for Infrastructure Development”, the SC-World Bank Group Conference brought together development practitioners, policy makers, regulators, as well as stakeholders involved in Islamic finance and infrastructure to discuss policy, regulatory and institutional interventions that can offer solutions for global infrastructure development needs. According to a World Bank study, annual global infrastructure investments are estimated in the region of $2.65 to $3.7 trillion with Emerging Markets and Developing Economies (EMDE) facing an annual infrastructure investment gap of $452 billion.

The conference also featured the sharing of Malaysia’s extensive experience in using Islamic financial instruments to support infrastructure development as data shows that 61 per cent of the world’s infrastructure Sukuk was issued out of Malaysia while the Global Infrastructure Investment Index 2016 ranks Malaysia as the second most attractive destination for infrastructure investment in Asia, and fifth in the world. 

"A critical imperative for infrastructure financing is to successfully bridge the gap between the demand for capital and the supply of it. The Securities Commission Malaysia has long recognised the promising potential of the Islamic capital market as an alternative avenue for large-scale long-term fundraising. In this regard, Sukuk, given their asset-based and risk-sharing nature, are particularly apt for infrastructure financing," said Tan Sri Ranjit Ajit Singh, Chairman of the SC.

 “At the World Bank Group, we strongly believe that Islamic finance has an important role to play in addressing the development challenges facing our client countries. The World Bank Group’s involvement in Islamic finance is directly linked to our objectives of reducing poverty, promoting financial sector development, broadening financial inclusion, and building financial sector stability and resilience in client countries,” said Laurence Carter, Senior Director, Infrastructure, Guarantees and Public-Private Partnerships, World Bank Group.

The one and half day conference is the first collaboration between SC and World Bank Group on a multi-year engagement involving Islamic finance and infrastructure financing. The discussion on day one focused on the key issues in mobilising Islamic finance for infrastructure needs while the second day was a closed-door roundtable of experts to elaborate on technical matters, workable solutions and possible pilot projects.

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