Islamic Finance as an Alternative of Infrastructure Financing for Asian Landlocked Developing Countries
Authors: NIAMAN Mohammad Asif , ASLAN Hakan 
Published: October 2023

Various infrastructure financing methods are being used worldwide, each with its own set of advantages and obstacles. Basically, the advantages and disadvantages of a financing method manifest differently depending on each country's economic system, geographical location, economic dependency, political conditions, cultures, and beliefs. Using a funding strategy in one country may be beneficial under certain situations but harmful in another. As a result, the usefulness and efficacy of financing methods should be studied in light of the countries' circumstances. The Asian Landlocked Developing Countries (LLDC), which share the same fate in terms of geographical constraints and economic reliance, are grappling with severe infrastructural gaps in all sectors. These countries have an emerging economy, are largely dependent on agriculture, have a poor management structure, are unorganised and have weak financial markets, and rely heavily on their neighbours’ transit routes to interact with the global economy. Some of these countries depend upon foreign assistance, and the lack of transparency and binding nature of this funding has had little impact on developing such countries' infrastructure. As a result, in order to finance their infrastructure projects, these countries must select the most acceptable financing option for their circumstances. The national budget constraint, inadequate local financial markets, the risk of foreign credits, and cultural and religious values in these countries are among the obstacles that contemporary financing methods present. Consequently, looking for alternative financing methods for these countries' infrastructure projects is critical. This paper intends to look at infrastructure financing methods and their challenges in Asian landlocked developing countries and evaluate Islamic finance as an alternative to conventional finance. The qualitative research method is used for this study. Furthermore, document analysis has been utilised as a data collection tool. First, the concepts of Islamic finance will be presented before moving on to the definitions and types of infrastructure. Afterwards, the conventional infrastructure financing methods, along with the shortcomings of these methods in Asian landlocked developing countries, will be discussed. Then the development of Islamic finance in Asian LLDCs will be studied. Finally, how Islamic finance addresses the challenges of conventional finance methods will be perused. The study found that the Islamic finance models, which are founded on the principle of shared income or risk sharing, can be implemented as an alternative to conventional finance in infrastructure financing. Public-private partnership (PPP) initiatives can be implemented effectively within the framework of Islamic financing concepts because the elements of the public-private partnership initiatives are congruent with Islamic finance principles. First of all, public-private partnership initiatives allow for risk sharing among project participants, including financiers. In addition, public-private partnership projects allow Islamic financiers to become project participants rather than just lenders. Following that, PPP infrastructure projects are by definition, free of speculation and gambling. Finally, project contracts are frequently well-specified and free of uncertainty. Besides this, creating financial inclusion and risk sharing in the framework of Islamic finance reduces the currency risk and the cost of financing and causes equitable distribution of wealth in society.