Islamic Finance and the Resources Sector : A Natural Fit for Project Finance
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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 realising 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 however differ from the Western approach permitting longer-term investments and profit-sharing arrangements, subject to the strict practice of Shari䡨 law. This paper 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.
Journal of Islamic Economics, Banking and Finance
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