As Islamic financial activities are increasingly crossing national boundaries, it is critical for more such dialogues to take place at an international level, in order to gain wider perspectives that can contribute to the development of a legal framework for Islamic finance that is internationally facilitative. Islamic finance today has become a major industry worldwide with over 300 institutions and an estimated asset size of more than USD1 trillion. Its continuing advances in the international financial landscape have recently been accompanied by several major efforts aimed at strengthening its international financial infrastructure. A key structural enhancement achieved recently was the establishment of the Islamic Financial Services Forum (IFSF) that serves as a platform for cross-border engagement among regulators to achieve financial stability in the Islamic financial system. Another important development achieved more recently was the establishment of the International Islamic Liquidity Management Corporation (IILM) as a mechanism for more efficient management of liquidity across borders for Islamic financial institutions. These continuing efforts to strengthen the foundations of Islamic finance have served to ensure its preparedness in meeting the challenges on the path of internationalisation. As we open a new chapter of global growth and development with the unfolding of a new decade, Islamic finance is in a position of strength to play a greater role in the global financial landscape. Today, many jurisdictions are interested in Islamic finance and have taken initiatives to develop the industry.

The starting point in revising laws is therefore to ensure that the governing laws allow for the conduct of Islamic finance business. A closely related goal is to consider removing elements in existing laws, including the non-regulatory laws, which may render the conduct of Islamic finance business uncompetitive or inefficient. Initial considerations would involve changes to ensure that Islamic finance is placed on a level playing field with conventional finance. The purposes and objectives of the governing laws for Islamic finance are known to be largely similar to conventional finance from the financial regulation standpoint. Notwithstanding this, an ideal approach is devising a legal framework for Islamic finance that sanctions the statutory obligations for Shariah compliance in the governing law. This approach however, may not be feasible as preference for religions concerns can be seen to be contradictory to the principles of secularism and parity of beliefs rights in certain jurisdictions. We may need alternative approaches. I will revisit and elaborate on these points in greater detail at a later part of this speech. In Malaysia, the new Central Bank of Malaysia Act 2009 explicitly codifies the duality of the Malaysian financial system which shall consist of the conventional financial system and the Islamic financial system. In this regard, Malaysia has taken the approach to enact regulatory laws that are, at least for banking and takaful (Islamic insurance) industry, separate from conventional finance as the legal foundation for the conduct of Islamic finance business.