Infrastructure deficit in Africa: Islamic finance as a gap-filler

Aliyu, Shehu Usman Rano (2023): Infrastructure deficit in Africa: Islamic finance as a gap-filler.

Abstract

The African continent has been bedeviled by an acute infrastructure deficit; and coupled with widening fiscal deficits occasioned by both internal and external shocks, the need for private sector participation in mitigating the infrastructure gap is paramount. Amidst other competing financing models, Islamic finance instruments, Sukuk, have been widely applied globally in providing socioeconomic and sustainable infrastructure. Accordingly, this study assesses the catalytic role of Islamic finance in alleviating the wide infrastructure deficit in Africa. The study covers a total of five countries: Egypt, Kenya, Morocco, Nigeria, and Saudi Arabia, employs survey research, a total of 414 sample data, and applies SmartPLS Structural Equation Modelling (SEM) techniques in its analyses. Major findings show that tweaking the internal legal and regulatory requirements provides the necessary environment for Islamic finance to thrive. Also, deducing from the Keynesian investment multiplier, Sukuk (Islamic bond) and sustainable Sukuk (green) were found to exert modest multiplier effects of 1.61 and 1.59, respectively, for any $1.00 change in Sukuk investment. In addition, threats to global peace, energy, and commodity prices, low-interest regimes in developed countries, and huge infrastructure deficit in the African continent are among the factors driving Islamic finance in the continent, and globally. Thus, filling the infrastructure gap requires concerted efforts by various African governments towards using Sukuk as a viable instrument in the continent.

• Item Type: MPRA Paper
• Language: English
• Keywords: Infrastructure, Islamic finance, deficit, Sukuk, PPP
• Subjects: C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C82 - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data ; Data Access; F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems; G - Financial Economics > G2 - Financial Institutions and Services > G29 - Other; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O18 - Urban, Rural, Regional, and Transportation Analysis ; Housing ; Infrastructure; P - Economic Systems > P4 - Other Economic Systems > P49 - Other

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