Islamic Finance-Based Financing Mechanism Proposals to Support Local Economic Development

Ömer Faruk Tekdoğan

Article Details

Islamic Finance-Based Financing Mechanism Proposals to Support Local Economic Development

Authors:

Ömer Faruk Tekdoğan

Publisher:

Gaziantep University

Main Topics:

Finans

Journal:

Gaziantep Üniversitesi Sosyal Bilimler Dergisi Vol.22 Issue 2, pp.565-578

Document Type:

Article

Publication Date:

4/2023

Document Language:

English

Document ID (Org No.):

2001288794

pISSN:

1303-0094

Keywords:

Abstract:

 In most countries, the main financing source for local governments for infrastructure projects comes from the central governments budget. However, considering the growing urban population, this source will be insufficient to meet the likely increasing infrastructure expenditures in the future as it is now. Local governments must explore alternative financing methods, including accession to capital markets. Nevertheless, most local governments, especially the small and medium-sized ones, do not have access to capital markets, due to their low creditworthiness and insufficient technical and administrative capacity. For this reason, some supportive mechanisms to increase the creditworthiness of local governments within the scope of the conventional financial system have been developed in many countries. Aspired by the well-proven methods of the conventional financial system, this paper proposes some supportive financing mechanisms for local governments based on Islamic financial principles. These mechanisms could help local governments to access capital with higher creditworthiness and contribute to the development of Islamic capital markets. In order to lower the borrowing costs for local governments by giving them direct or indirect access to capital markets, this study suggests five possible Islamic financing methods. However, because to the novelty of the subject, it attempts to lay the groundwork for future research that will yield fresh perspectives on this issue.

 In most countries, the main financing source for local governments for infrastructure projects comes from the central governments budget. However, considering the growing urban population, this source will be insufficient to meet the likely increasing infrastructure expenditures in the future as it is now. Local governments must explore alternative financing methods, including accession to capital markets. Nevertheless, most local governments, especially the small and medium-sized ones, do not have access to capital markets, due to their low creditworthiness and insufficient technical and administrative capacity. For this reason, some supportive mechanisms to increase the creditworthiness of local governments within the scope of the conventional financial system have been developed in many countries. Aspired by the well-proven methods of the conventional financial system, this paper proposes some supportive financing mechanisms for local governments based on Islamic financial principles. These mechanisms could help local governments to access capital with higher creditworthiness and contribute to the development of Islamic capital markets. In order to lower the borrowing costs for local governments by giving them direct or indirect access to capital markets, this study suggests five possible Islamic financing methods. However, because to the novelty of the subject, it attempts to lay the groundwork for future research that will yield fresh perspectives on this issue.

 In most countries, the main financing source for local governments for infrastructure projects comes from the central governments budget. However, considering the growing urban population, this source will be insufficient to meet the likely increasing infrastructure expenditures in the future as it is now. Local governments must explore alternative financing methods, including accession to capital markets. Nevertheless, most local governments, especially the small and medium-sized ones, do not have access to capital markets, due to their low creditworthiness and insufficient technical and administrative capacity. For this reason, some supportive mechanisms to increase the creditworthiness of local governments within the scope of the conventional financial system have been developed in many countries. Aspired by the well-proven methods of the conventional financial system, this paper proposes some supportive financing mechanisms for local governments based on Islamic financial principles. These mechanisms could help local governments to access capital with higher creditworthiness and contribute to the development of Islamic capital markets. In order to lower the borrowing costs for local governments by giving them direct or indirect access to capital markets, this study suggests five possible Islamic financing methods. However, because to the novelty of the subject, it attempts to lay the groundwork for future research that will yield fresh perspectives on this issue.

 Çoğu ülkede, yerel yönetimlerin altyapı projeleri için temel finansman kaynağı merkezi hükümetin bütçesinden aktarılan transferlerdir. Ancak artan kent nüfusu düşünüldüğünde, bu kaynak şimdi olduğu gibi gelecekte artması muhtemel altyapı harcamalarını karşılamada yetersiz kalacaktır. Yerel yönetimler, sermaye piyasalarına katılım da dahil olmak üzere alternatif finansman yöntemlerini araştırmalıdır. Bununla birlikte, çoğu yerel yönetim, özellikle küçük ve orta ölçekli olanlar, düşük kredibiliteleri ve yetersiz teknik ve idari kapasiteleri nedeniyle sermaye piyasalarına erişememektedir. Bu nedenle birçok ülkede geleneksel finansal sistem kapsamında yerel yönetimlerin kredibilitesini artırmaya yönelik destekleyici mekanizmalar geliştirilmiştir. Konvansiyonel finansal sistemin kanıtlanmış yöntemlerinden ilham alan bu çalışmada, yerel yönetimler için İslami finans ilkelerine dayalı bazı destekleyici finansman mekanizmaları önerilmektedir. Bu mekanizmalar, yerel yönetimlerin daha yüksek kredibiliteye sahip biçimde sermayeye erişmesine yardımcı olabilir ve İslami sermaye piyasalarının gelişmesine katkıda bulunabilir. Bu çalışma, temel olarak yerel yönetimlerin sermaye piyasalarına doğrudan veya dolaylı olarak erişmelerini sağlayarak borçlanma maliyetlerini düşürmeye odaklanan beş farklı İslami finansman modeli önermektedir. Önerilen tüm modeller ülkemizdeki ilgili mevzuat ile büyük ölçüde uyumludur, ancak yerel yönetimlerin borçlanma limitlerine ilişkin yasal düzenlemelere ihtiyaç duyulabilir. Önerilen modellerin uygulama prosedürleri, geçiş sürecinin izlenmesini gerektiren yasal çerçevenin uyarlanmasını gerektirebilir. Bu çalışma, konunun özgünlüğü sayesinde genel bir fikir vermekte ve bu konuda yeni açılımlar sağlayacak daha sonraki çalışmalara zemin hazırlamaya çalışmaktadır.

Article Details

Islamic Finance-Based Financing Mechanism Proposals to Support Local Economic Development

Authors:

Ömer Faruk Tekdoğan

Publisher:

Gaziantep University

Main Topics:

Finans

Journal:

Gaziantep Üniversitesi Sosyal Bilimler Dergisi Vol.22 Issue 2, pp.565-578

Document Type:

Article

Publication Date:

4/2023

Document Language:

English

Document ID (Org No.):

2001288794

pISSN:

1303-0094

Islamic economics and finance

Islamic capital markets

sukuk

creditworthiness.İslam ekonomisi ve finansı

İslami sermaye piyasaları

Sukuk

Kredi değerliliği

Issues

Article Details

Authors: Ömer Faruk Tekdoğan

Publisher: Gaziantep University

Main Topics: Finans

Journal: Gaziantep Üniversitesi Sosyal Bilimler Dergisi Vol.22 Issue 2, pp.565-578

Document Type: Article

Publication Date: 4/2023

Document Language: English

Document ID (Org No.): 2001288794

pISSN: 1303-0094

Issues

Authors:

Ömer Faruk Tekdoğan

Publisher:

Gaziantep University

Main Topics:

Finans

Journal:

Gaziantep Üniversitesi Sosyal Bilimler Dergisi Vol.22 Issue 2, pp.565-578

Document Type:

Article

Publication Date:

4/2023

Document Language:

English

Document ID (Org No.):

2001288794

pISSN:

1303-0094