Adelekan, S; Wamuziri, S and Binsardi, B (2013) Evaluation of islamic financing products for housing and infrastructure development. In: Smith, S D and Ahiaga-Dagbui, D D (eds.) Proceedings of 29th Annual ARCOM Conference, 2-4 September 2013, Reading, UK.
Abstract
Housing delivery and infrastructure development are fundamental necessities for economic growth of any nation. However, the provision of these essential services on the required scale to meet demand remains problematic for most countries and governments worldwide. Lack of adequate supply of housing and infrastructure project finance has been identified as a major obstacle to such development. Previous studies and available literature have also highlighted that existing conventional finance and banking structures are unlikely to provide adequate funding streams necessary to address the acute shortage of housing and infrastructure particularly in developing countries. This paper evaluates the potential of Islamic financing products and services to contribute to housing and infrastructure finance. Firstly, a review of the principle features of Islamic financing products is provided. Secondly, the interest based conventional banking is compared with the Non-interest based Islamic finance which is currently gaining ground in many countries including the United States and the United Kingdom. Case studies of some Islamic banking products that have shaped the infrastructure landscape are provided. This study further evaluates and analyses the concept of cost of capital for Islamic finance models and products, and compares and contrasts it with conventional bank lending systems. The study finds that considerable potential exists for the construction industry worldwide to benefit from Islamic Finance which possesses business partnership characteristics that entail risks and reward sharing as opposed to the interest based conventional finance and banking systems. Furthermore, Islamic finance products are found suitable for housing and the construction industry. As a consequence, it is recommended, that individuals, clients, contractors, and business leaders should take a serious look at these products for their project and corporate finance needs for housing and infrastructure development.
| Item Type: | Conference Paper (Paper) |
|---|---|
| Uncontrolled Keywords: | conventional banking; housing delivery; infrastructure development; islamic finance; non-interest finance; risk sharing |
| Index terms: | developing country, United States, corporate finance, case study, partnership, housing delivery, United Kingdom, banking, infrastructure development, stream, funding, economic growth, infrastructure project, construction industry, housing, financing |
| Subjects: | economic analysis, data collection methods, construction type, infrastructure and transport systems, industry analysis, housing and residential development, partnership management, development economics, infrastructure engineering, water management, Geography, economic development |
| Topics: | Urban Studies, International Construction, Business Strategy, Geographical Context, Research Practice, Engineering Principles, Stakeholder Management, Construction Technology, Sustainability |
| Descriptive scope: | 4 PCTE |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here