Structured Islamic Finance Options for the Resources Sector
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The investment profile and particularly the horizon of traditional debt financing for projects seldom matches the returns on assets, particularly in the resources and infrastructure sectors, where assets have a lengthy construction phase before realizing a return. This mismatch in investment duration and risk-return profile is a key weakness of the Western approach to limited-recourse borrowing under project financing conventions. The motives underlying Islamic finance differ, however, from the Western approach permittinglonger-term investments and profit-sharing arrangements,subject to the strict practice of Shariᨠlaw. This article highlights the advantages of Islamic investment practices over traditional approaches in project financing, which can potentially fill a significant gap in funding options for firms in the global resources sector.
The Journal of Structured Finance
© 2012 Institutional Investor. This is the author-manuscript version of this paper. Reproduced in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.