Topic: Islamic Banking

Investigation of innovative funding for a major development using Islamic Financial Products

In the first quarter of 2009 the UK government was facing a major crisis in its 2012 Olympic Games infrastructure development programme. Private finance has dried up in the wake of the global crisis and developers were asking for more public funds to complete projects.

In this scenario, it became obvious that fresh sources of finance would have to be identified to keep the programme on track. Spotting the opportunity, you are summoned by a consortium of an Islamic Investment Bank and a retail Islamic bank to look at the possibility of using Islamic finance to bridge the gap.

Your clients inform you that the UK Government has toyed with the idea of launching a Sovereign Sukuk issue for some time but has not found sufficient grounds to accord it a priority at present. However, all required changes to create tax neutrality for Sukuk issuance have been enacted.

[Note: A sovereign UK Government Sukuk was finally launched in 2015]

The demographics of the Thames Gateway, where the bulk of the games are to be held, also offer interesting possibilities for a range of Islamic finance products. It is estimated that over a third of the population of the nine boroughs in the Thames Gateway is Muslim. This may offer additional possibilities for selling any housing units through Islamic home financing packages. There may also be possibilities for Takaful products to accompany the home financing facilities.

Your main task was to look at the possibility of using Sukuk funding for the Olympic Village and explore the feasibility of such a move. In addition, you were requested to look at the scope for retail Islamic finance products as the housing units are sold in the post-Olympic phase.

Two articles from the UK press outlining the funding issues are appended at the end of this question. These give you more background on the Olympic Village and its funding crisis.

Required -

You were to look at the two articles from the Press appended as Appendix I and Appendix II describing the funding crisis gripping the 2012 Olympic Games. Get as much information about the funding of the Olympic Games and the role of the private sector in this.

Of particular interest is the Olympic Village designed to house the athletes and later sold down to the resident community. Get information about the original deal with the developer Lend Lease to deliver this. Analyse the reasons for the funding difficulties faced by Lend Lease. Get information about the mix of affordable and other housing units desired by the Olympic Delivery Authority (ODA).

Assess if a Sukuk would be suitable means of funding the Olympic Village.

Would such an issue have tapped sources of funding which were not available via conventional finance? Would the Olympic label have helped attracting funds from the target markets?

Attachment:- Assignment File.rar