Islamic financing for infrastructure projects and its implementation barriers

¹ Department of Civil Engineering, Faculty of Engineering, Universitas Indonesia, Depok, Indonesia
² School of Property, Construction and Project Management, RMIT University, Melbourne, Australia
³ School of Civil Engineering and Built Environment, Faculty of Science and Engineering, Queensland University of Technology, Brisbane, Australia

^* Corresponding author: ayomi@eng.ui.ac.id

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.