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18.1.10

Case Study: MIGA and Islamic Finance



Multilateral Investment Guarantee Agency
Djibouti, April 2008

Abstract: "Increased liquidity in Islamic financial markets, spurred by oil revenues in the Gulf region, is creating a growing demand for deals structured using Islamic finance. In order to satisfy this demand, traditional business tools need to be adapted to meet the relatively unique and complex needs of Islamic finance. In 2007, Multilateral Investment Guarantee Agency (MIGA) was tapped to provide political risk insurance for a critical project in Djibouti that was being funded through an Islamic financing structure. The main challenge faced by the agency was that the project's Islamic financing structure had payment obligations spread out across numerous agreements, while MIGA's guarantee coverage for third party lenders normally considers such obligations under a single loan agreement. MIGA structured its guarantee in a way that addressed the key risks that concerned the project financiers, while meeting the strict requirements governing the Islamic structure. This resulted in the agency's first-ever guarantee coverage of an investment supported by an Islamic financing structure. The Doraleh Container Terminal project involves the development, design, construction, management, operation, and maintenance of a new container port terminal in the city of Doraleh, Republic of Djibouti."

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1 comment:

  1. "Increased liquidity in Islamic financial markets, spurred by oil revenues in the Gulf region, is creating a growing demand for deals structured using Islamic finance. In order to satisfy this demand, traditional business tools need to be adapted to meet the relatively unique and complex needs of Islamic finance."

    What is so complex about Islamic Finance? It is the most simple and straight forward financial system on earth based on sharing but we have made it complex through introduction of conventional financial products in the guise of Islamic Financial products.

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