Islamic finance, as its name suggests, was founded based on Islamic law or Sharia which rules out interest-based systems and entails risk sharing ethical investment, and asset-based finance. This paper will take a further look at the application of Islamic finance as an emerging form of insurance to meet the demands of the current world. A highly useful application area is indeed infrastructure funding and construction for which it brings efficiency but primary, ethical, and sustainable solutions compared to the mainstream financing models.
Advantages of Islamic Finance for Infrastructure
Based on the literary review, the following are some of the benefits that Islamic finance has for infrastructure projects. Refocusing on real economic activity and funding asset-based deals, it makes the actual link between funding and bodies of assets and practical projects. In this context, Dr. Raed El Omari has pointed out that this approach minimizes speculation risks while increasing the reliability and clarity of the financial operations. As is the case documented in this paper about Jordan where the development of infrastructure is central to the government’s Vision, Islamic finance acts as the conveyor of funds that supports projects which in turn facilitates diversification and growth of the economy.
Key Instruments in Islamic Infrastructure Financing
Some of the Islamic finance instruments are specifically suitable for the financing of infrastructural projects. Sukuk: It is a well-known type of financial market instrument that is the Islamic equivalent of bonds in conventional markets. Dr. Raed El Omari argues that Sukuk has been useful for establishing financings for big endeavors in infrastructure development like roads, bridges, and energy plants. Another useful tool is Cristina, which is an Islamic sale contract specifically for manufacturing and construction where payments are made in phases as per the set project progress. These instruments ensure that financing is tied to the project’s progress and its outcome so that the financier cannot influence the selection decisions of the implementing organization.
It brings into perspective the role of Islamic finance within the context of financing and achieving infrastructure development sustainably and ethically away from the conventional approaches in financing. Some of the key points put forward by Dr. Raed El Omari are that Islamic finance can be a tool for changing the world and that it presents a concrete and positive outlook of how it can serve as an agent for positive economic change. Examining the experiences in Islamic financing within the context of Jordan’s major infrastructural projects demonstrates the success of the country’s implementation of Islamic finance as a role model for other nations. When facing difficulties or investing in successes, it’s still possible to show that Islamic finance can act as a stimulus to the development of infrastructure in the world that is stable and supports the growth of the people.
