Whilst the global financial crisis has provided Islamic finance with a unique opportunity in the international financial system, the future success of the industry moving forward, will also depend on its continuing ability to innovate more indigenous shariah-based instruments and evolve business models that strengthen the nexus of Islamic finance with the real economy. An essential part of the overall infrastructure therefore is an effective legal framework to provide an enabling environment that will enforce the legality of contracts according to the Shariah and the regulatory treatment of the new and innovative Islamic financial solutions. 2  BIS central bankers’ speeches  While Islamic finance practitioners and scholars continue to draw from the source of fiqh muamalat to create new and innovative instruments, the legal framework needs to be further strengthened to ensure alignment with new market developments. This is to ensure that it continues to lend certainty and predictability to the innovative products and financial transactions. Furthermore, as Islamic financial activities venture beyond national boundaries, the development of legal frameworks that is facilitative of cross-border transactions is pivotal. There has to be court recognition and acceptance of the Islamic contracts within the common and civil law systems, with a common approach of interpreting the rights of the contracting parties based on Shariah principles, in particular for cross-border transactions. Malaysia has taken the approach to address this imperative via the Law Harmonisation Committee which was established in 2010.

In providing the comprehensive range of the whole spectrum of financial products and services that are in accordance with these principles, Islamic finance has been able to provide the total financial solution to consumers and businesses. The recent growth of Islamic finance has been fuelled by a sustained phase of innovation. The scope of financial business has also increased in sophistication, particularly in the areas of private equity, project finance, sukuk origination as well as fund and wealth management. To sustain this trend, further in-depth applied research is needed to develop more financial products that create such links with the real economy in terms of the operating models, risk management and supporting infrastructure. The second value proposition of Islamic finance lies in its merit as a potent tool for enhancing financial inclusion and for being beneficial to all members of society. Its immense potential in advancing social-economic development is mirrored by the continuing efforts to introduce Islamic finance offerings in emerging economies, particularly in Asia, the Middle East and  BIS central bankers’ speeches  1  African nations in recent years. In bringing unserved communities into the economic mainstream through the financial intermediation process, it can contribute towards poverty alleviation, job creation and more equitable economic growth. A recent study has however revealed that, despite being a promising financial segment, the availability of microfinance in Muslim-majority economies is either non-existent or still at very early stages.