Islamic Project Financing in Pakistan: Current Challenges and Opportunities Ahead

Document Type : Research Paper

Authors

Department of Management Sciences, COMSATS Institute of Information Technology (CIIT) Islamabad, Pakistan

Abstract

This study is related to an Islamic project financing with a major focus on investigating the role of Islamic finance in financing infrastructural development projects (toll roads, power plants, airports, and plants, as well as natural resource exploitation projects, such as hydroelectric dams, mining projects, oil and gas assets, and paper mills), especially in the context of Pakistan. Infrastructural development being a significant indicator of stability and growth, most countries attempt to develop their infrastructure to a competitive level in their respective regions. Considering this critical aspect of economic development, Islamic project financing can be beneficial to developing economies like Pakistan as it would be able to compensate for a lack of domestic infrastructural development. New and innovative financial solutions are required to cater to the needs of infrastructural investment. Islamic project is an area which can open new channels for this purpose and this area is also under-explored. Islamic banks in Pakistan and across the globe need to be involved in huge infrastructural financing.1 However, their growth rate and efficiency is higher than in conventional financing. Focusing on this aspect, this research study is based on a review of project financing in Pakistan. The study portrayed the current scene of project financing in Pakistan, and investigated the involvement and challenges faced by Islamic modes of financing in infrastructural projects in Pakistan. Fourteen in depth interviews were conducted with public and private sector professionals to investigate the issues and prospects. The main challenges faced by Islamic financial institutions (IFIs) are a lack of regulation and investment avenues, and non-coherent standards and practices. However, these IFIs have opportunities with respect to the Islamic market and fund development.


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Interdisciplinary Journal of Management Studies (Formerly known as Iranian Journal of Management Studies)
Volume 8, Issue 1 - Serial Number 1
January
January 2015
Pages 47-71

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