Moreover, the lack of technical and contract standardization seems to weaken the potential of Islamic finance, as an alternative financing against the conventional financial institutions. Besides, the customer base needs enlargement including household services. The regulation and supervision framework of Islamic financial institutions should also be improved. In conclusion, the current crisis has given an opportunity to Islamic financial institutions to prove their potential. As their products limit the excessive leverage and the disruptive financial innovations, they have confirmed their products’ advantages to ensure macroeconomic stability. This may lead the way for Islamic financial institutions to expand and improve. Dear Guests As you may know, the Central Bank Governors of the Organization of Islamic Conference gathered yesterday in Istanbul upon the invitation of the Central Bank of Turkey on the 40th anniversary of the OIC and 25th anniversary of the Standing Committee for Economic and Commercial Cooperation of OIC. The purpose of that meeting was to make a meaningful contribution to the ideal of reaching a sustainable and stable global order based on the principles of justice, equity, participation and freedom fort he humanity to reach peace and prosperity that embraces differences between the civilizations as a source of richness and not as a reason for clash. Our objective is to make these meetings permanent that convenes regularly every year to stipulate our common views and decisions regarding the issues that concern the member countries. Once again I extend my warm welcome to all participants.

The views supporting Islamic finance state that Islamic financial institutions are more resilient to external shocks. Profit and loss sharing feature of the transactions in Islamic finance provides a protection to these institutions, apart from the capital. This feature of the Islamic financial institutions could transfer a negative shock on the asset side to the liability side. Furthermore, due to the fact that the investors (depositors) take on some part of the risk and do not have deposit insurance, they have more incentives to exercise tight oversight over these institutions. In addition, as compared to conventional banks, they have held a comparatively larger share of their assets in reserve accounts for the liquidity management. Thus, even if Islamic financial institutions have risky investments, these buffers make them more resilient to the negative external shocks. On the other hand, the opposing views claim that Islamic finance does not need to improve the financial stability. According to this view, profit and loss sharing feature of Islamic finance transfers the credit risk from Islamic institutions to their depositors, and therefore, motivates the excessive risk taking incentive of Islamic banks. While capital value and earnings of customers are not guaranteed in Islamic finance, this feature may increase moral hazard and motivation for excessive risk taking without adequate capital. 2  BIS Review 124/2009  During the recent financial crisis, Islamic financial institutions have demonstrated significant resilience. They have been less affected compared to the conventional financial institutions thanks to prohibitions on excessive leverage.