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Do sukuk spur infrastructure development?

Houcem Smaoui (College of Business and Economics, Qatar University, Doha, Qatar)
Karim Mimouni (Qatar University College of Business and Economics, Doha, Qatar)
Ines Ben Salah (Qatar University College of Business and Economics, Doha, Qatar)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 8 February 2021

Issue publication date: 27 July 2021




This paper aims to examine the effect do Sukuk Spur Infrastructure Development of Sukuk market expansion on infrastructure development for a sample of 15 emerging countries over the period 1997–2018. The paper also compares the role of Sukuk in infrastructure development to that of the size of the banking system, bond market development and stock market development.


A novel index of infrastructure development is constructed via principal component analysis. This index is regressed on Sukuk market development and other macroeconomic and institutional variables. To tackle the problems of heteroscedasticity and the existence of serial correlation in the residuals, the panel model is estimated using the generalized least squares (GLS) procedure with random effects and robust standard errors.


The evidence shows that a well-developed Sukuk market contributes to the expansion of the country’s infrastructure, whereas a larger banking system and a better capitalized stock market do not have any significant effect on infrastructure development. Surprisingly, well-developed bond markets jeopardize infrastructure expansion, thereby pointing to a potential crowding-out effect between Sukuk and bonds in financing infrastructure investments. Additionally, per capita GDP and education are positively related to infrastructure development, whereas inflation has a negative effect on the country’s proliferation of infrastructure.


This study uses a novel infrastructure index via principal component analysis and shows that Sukuk markets fill an important gap in the financing of large-scale and long-term projects. This result is novel and has not been documented in previous research.



The authors would like to thank Dr. Boubacar Diallo for his valuable help and for his insightful comments. The authors also thank two anonymous referees for their comments and suggestions. Any errors remain the author’s responsibility.


Smaoui, H., Mimouni, K. and Ben Salah, I. (2021), "Do sukuk spur infrastructure development?", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 14 No. 4, pp. 655-670.



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