Sub-Sahara Africa’s Infrastructure Funding Gap: Potentials from Sukuk Financing

Abstract

Sub-Sahara African (SSA) region as a large part of the African continent suffers huge infrastructure deficit mainly as a result of the vast funding gap. The negative impact of the infrastructure deficiency continues to constrain socio-economic development and the general well-being of the people of the region. Heavy reliance on the traditional sources of funding by many of the countries in the region has failed to meet ever-growing demands for infrastructural development of the region. Potentials presented by Islamic finance are yet to be exploited by a large number of countries in the region. This study evaluates the depth of utilisation of Islamic capital market using Sukuk instruments as another source of funding to fill the observed funding gap for infrastructure development. This study finds that the use of Sukuk as a long-term financing instrument is still at its infancy stage in the region. The paper, therefore, suggests that the SSA countries can undertake rapid and massive infrastructure developments in the region through the use of Sukuk instruments, thereby eliminating increasing sovereign debt over-hang from the conventional debt market. This study also recommends that policy makers in the region put in place required laws and regulations that will provide enabling environments for effective utilisation of Sukuk instruments for infrastructural development. Similarly, strong political will on the part of the region’s political leaders is essential in nurturing strong institutions that can engender policy continuity to ensure effective and efficient management of infrastructure projects funded by Sukuk instruments.

Public expenditure on infrastructural development and economic growth: Evidence from Nigeria

“…The Breusch-Godfrey Serial Correlation (LM) test suggests that the null hypothesis of autocorrelation can be rejected since the probability value is greater than the 5% critical value. Findings from the study support the conclusions from Fedderke and Luiz (2005), Edun, Akinde, Jolaleye, and Idowu (2013), and Abdurraheem and Naim (2018) that stated that infrastructure investment influences economic growth across different small open economies.…”

Blockchain Based Retail Sukuk for Infrastructure Development and Financial Inclusion in Pakistan

“…Hence Sukuk cannot be considered as a viable alternative for financing infrastructure projects in Sub-Saharan African countries. (Abdurraheem & Naim, 2018).…”

“…For example, an efficient power supply can enhance the productivity of businesses and manufacturing concerns; better roads and rail systems can facilitate increased intra-regional trade and investment; better communication services can facilitate greater socio-economic integration among the people of the region. Similarly, access to clean water and sanitation improves the general health of the population, thus enabling more people to work and contribute productively to the economy (Abdurraheem & Naim, 2018). It has been proposed to use innovative Sukuk structures based on risk-sharing principles subjected to profit/loss distribution among the investors.…”

Factors influencing Nigerians to invest in Sukuk for infrastructure development

“…Sukuk is a proportional representation of ownership of the underlying asset for a specific timeframe with returns and risks related to income through the underlying asset of Sukuk in the hand of Sukuk holders (Ramadayanti et al, 2017). Abdurraheem & Naim (2018) affirmed the possibility of Sukuk instrument as an alternative for the development of infrastructure gap in Sub-Sahara African (SSA) countries and recommended that the SSA countries can undertake massive and rapid developments of infrastructure in the region by utilizing Sukuk, thereby eradicating increasing country debt over-hang from the traditional debt market. More so, Echchabi, et al (2016) examine the significance of Sukuk financing in the growth of the economy.…”