Muhammad bin Ibrahim: Shariah issues and Malaysia’s Islamic financial sector Speech by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the “Muzakarah Cendekiawan Syariah Nusantara Ke-9”, Jakarta, 10 June 2015. *  *  *  I would like to express my gratitude to Allah Almighty for His grace that the 9th Regional Shari’ah Scholar Dialogue could be held here in the city of Jakarta. This is the second time the Dialogue is held in Jakarta since 2009. I would like to congratulate the organizers; Universitas Islam Negeri Syarif Hidayatullah (UIN) Jakarta and the International Shariah Research Academy for Islamic Finance or ISRA for their initiatives in organising this Dialogue. This Dialogue was initiated in 2006 by Bank Negara Malaysia and subsequently led by ISRA. Our sole intention has always been to promote mutual understanding and close collaboration among Islamic scholars in this region on issues relating to fiqh muamalat and Islamic finance. Through this platform, the vision is to generate new ideas and views among scholars in an atmosphere of tolerance and mutual respect, irrespective of our different cultures, economic and political structures. Today, I would like to share my views on the following three areas: i. Strengthening the role of Shariah scholars;  ii. Fostering the dynamism of ijtihad in a contemporary setting; and  iii. Cultivating the spirit of mutual respect within the diversity of Shariah interpretations.

If we continue to practise these values daily and effectively, in my opinion the Banco de España can, among other things, help establish a fully fledged assessment culture that boosts the efficiency and transparency of public policies and enables us as a society to properly integrate long-term considerations into decision-making. The importance of incorporating long-term considerations into economic policymaking The available evidence on the determinants of long-term growth points to democracy and the quality of its institutions as a factor that contributes positively to economic growth. The fact that institutional quality determines the ability to incorporate long-term considerations into decisionmaking may help explain this relationship. These considerations are essential to the idea of progress and, in economic policy, to defining and implementing measures that foster prosperity and opportunities for all citizens, both present and future. Central bank independence is warranted precisely on those grounds.1 An inflationary bias arises when the monetary authority lacks independence and, in pursuit of short-term objectives, stimulates demand by repeatedly using monetary policy beyond what would be consistent with its inflation target. Higher levels of economic activity and employment can be attained in the short term, but the costs come later. The inflationary bias is ultimately anticipated and built into agents’ expectations and, therefore, into pricing and into wage negotiations. The final outcome is higher inflation, without persistent improvements in the level of output or employment in the economy. This renders monetary policy ineffective and commitments to price stability cease to be credible.