All encompassing

Author: | Published: 1 Jul 2007

A number of Islamic project finance transactions have successfully closed over the last three years, attracting interest from the regional project finance market, not least for the structural innovation that each of these transactions has introduced. But the contribution these deals have made to the development of Islamic finance overall has been overshadowed by the high-profile sukuk offerings that seem to dominate the headlines.

Upon closer examination, a number of parallels can be drawn between Islamic project financing techniques and some of the sukuk structures in the market. One parallel is evident in the use of musharaka (partnership) principles. However, what distinguishes the Islamic project finance market from sukuk is that a lot of these transactions are multi-sourced financings, requiring the Islamic tranche to be integrated within a wider, in most cases pari passu, financing arrangement.

One of the more obvious examples of Islamic project finance leading the way is...