Islamic Finance: Focusing Project Financing for Growth and Realizing the Higher Objectives of Sharīʿah
Published Online: December 2019
Islamic system of finance has the capacity to serve the purpose of financial intermediation as a means to create sustainable value in the real economy at national and global levels. However, the most of Islamic banks and financial institutions (IBFIs) are lacking in application of the Divine principles in letter and spirit. They have not learned the lesson of avoiding finance products that led to instability, injustice and crises in the global finance. They might be lagging behind the conventional institutions in adoption of value based finance that emerged in global finance in the wake of GFC, 2008 (WB-IDB,2016; P.6) to focus on value based intermediation (VBI), environment, social and governance (ESG) aspects and the stakeholders approach. This article focuses on the area of project financing by the IBFIs for different sectors including communication means, energy, residential and commercial buildings, infrastructure and socio- economic projects, and the role that Islamic banks can play in financing the projects leading to development and shared prosperity. Its finding is that while the conventional institutions are turning to the ethics and values based financial intermediation and business, it’s more a duty of the IBFIs to move to value based intermediation by focusing on project financing.
Islamic banks and finance institutions, VBI, ESG, SDGs, Project financing. .