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Sharia instruments vital for GCC project finance

MANAMA: Sharia-compliant financial instruments will play an increasingly important role in project finance across the region.

That was the message from Charles Russell Middle East partner Nicholas Polley at a seminar at the InterContinental Regency Hotel organised by the law firm yesterday.

"Across the GCC, all major projects now have a significant involvement from Sharia-compliant investments," he said.

"With the growth of the Islamic finance market in recent years, experience has shown that major projects can be commercially financed either fully from Islamic finance or by means of both conventional and Islamic finance arrangements.

"Islamic finance in project finance has been growing hugely over the past seven years.

"There are two reasons for this," he said.

"Firstly, Sharia-compliant structures are being more widely recognised and secondly Islamic banking across the region can now operate at very competitive rates for key projects," he added.

He said that globally energy and infrastructure projects will need some $10 trillion between now and 2030.

The world's energy needs would be 25pc higher by 2015 and nearly 50pc higher in 2030.

"The growth in Islamic finance demand has led to the development of Sharia-compliant structures for project financing, construction projects and asset financing," he added.

"For a project which has already been completed and is then going to be financed by a purchaser, an ijara leasing arrangement may be used.

"For a project or asset which is to be constructed or manufactured the istisna would be the correct Sharia model," he said.

The seminar was the second run by Charles Russell in Bahrain this year and the firm's Middle East head Clive Hopewell said he saw this latest event as being part of their effort to support the Bahrain Back to Business movement.

"We are seeing work on government elated projects picking up since the unrest but it may take a while to see a pick up in private projects," he said.

"But there is a will to get back to normal. Our office stayed open for most of March and I am pleased that most of our people stayed at work during the trouble and I would like to thank them for their dedication," he added.



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