Presentation Session 4: Arnaud Raynouard, Université Paris Dauphine ISMED Annual Conference, Defining a Way Forward for Infrastructure Investment in the Middle-East and North Africa (MENA)

1. Leveraging financial tools for
infrastructure projects
ISMED Task Force on Islamic
Finance
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2. The context
• Challenges specific to the region imply that financiers
have to think outside of the box and sometimes
innovate to successfully close a transaction
• Islamic Finance has never seen greater appeal
• it is increasingly pivotal for financial sector participants
to understand the field of Islamic finance and how it
can be utilized in new and innovative financing
structures
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3. An introduction to Islamic Finance
• Reminder of five pillars of Islamic Finance:
– Two requirements:
• Participation in losses and profits;
• The investment enters the scope outside of financial sector,
free from gambling and speculation, towards development
of real, tangible economy.
– Three prohibitions:
• “Maysir”, directing that no speculation is possible;
• “Gharar” - lack of 100% transparency of the investment, if
the investment remains uncertain, the investment is
prohibited;
• “Riba”, prohibition of interest in banking loans, the basis is
that it is prohibited “to gain money with money”.
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4. Islamic finance vs conventional
finance
• In banking : the existence of interest between loaner
and borrower.
• Insurance : risk, uncertainty, hazard (“aléa”), the basis
of insurance contract
• Symbolic economy - making money with money
• State law vs. Shariah principles ?
- Case Shamil Bank of Britain EC vs. Beximco Pharmaceuticals Ltd (Court of Appeal, 28 January
2004): The governing law cannot be English law subject to Shariah principles
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5. Islamic Finance and infrastructure
• Long-term financing: matching maturity of long-term
investment
• Participative financing in the performance of the
underlying assets: the financier acts as a partner and
the remuneration due by the company is only based on
the cash-flows generated by the financed assets
• Asset-based and asset-backed financing: financing
based on tangible assets
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6. The objectif of the propositions
• To trigger on a more frequent basis Islamic compliant
financing as a complement to conventional financing to
fund infrastructure development
• To develop project finance structures that are not only
consistent with Shari’a principles but are also
attractive to international capital providers
• To provide comprehensive tools to limit the obstacles in
structuring projects partially or fully funded by Islamic
investors
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7. Université Paris-Dauphine
L’université choisie
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