Sdgs: islamic project finance for infrastructure ppps in Sub-saharan Africa

Abstract

Sub-Saharan Africa (SSA) is the region with the highest number of countries that did not meet the Millennium Development Goals (MDGs) which expired in 2015. Meeting the newly established Sustainable Development Goals (SDGs) is inextricably linked to the availability of quality infrastructure. The current slowdown of the post-global financial crisis economy is already threatening to hinder the ability of SSA to meet the new SDGs. Without investments in key infrastructures that support a modern economy such as roads, electricity and safe water and sanitation, SSA may not meet the new SDGs targets. The past PPPbased conventional debt-financed solutions to SSA infrastructure have failed to produce the desired results and are being terminated. A growing body of empirical studies points to the conventional debt-finance used as a major weakness of the PPP model. The pressure to meet lender’s debt repayment covenants force Project companies to pushback scheduled maintenance, and critical infrastructure investments leading to contract breaches and eventual cancellations. This article seeks to highlight why SSA countries should adopt Islamic project finance for PPP financing. We argue that Islamic project finance will eliminate the pressure of meeting specific debt service covenants, lower the cost of services, ensure service sustainability, affordability, and will assist SSA countries meet the new SDG targets. Islamic project finance instruments are partnership-oriented, equity-based, share risks and are compatible with SDGs.