Zeti Akhtar Aziz: Internationalisation of Islamic finance – bridging economies Welcoming address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Global Islamic Finance Forum 2012, Kuala Lumpur, 19 September 2012. *  *  *  This is a decade of profound change in the global financial landscape. The world is also being confronted by the repercussions of the ongoing global financial crisis. Despite this more challenging global financial and economic environment, Islamic finance has continued to remain on its growth trajectory. For Islamic finance, it has been a defining period. Its rapid growth and the intensification of its internationalisation in this decade is now enhancing its role in strengthening international economic linkages between different parts of the world. It is my great pleasure and honour to welcome you this morning to this third Global Islamic Finance Forum (GIFF) 2012. First of all, let me express our gratitude to the Honourable Deputy Prime Minister of the Republic of Turkey, His Excellency Mr. Ali Babacan for accepting our invitation to deliver the Public Lecture at our gathering here today. We are most honoured by your presence and we immensely look forward to your address. Islamic finance: fostering global linkages In this new era, in which the international dimension of Islamic finance has gained significance, Islamic finance has continued to demonstrate its viability and competitiveness in this more liberalised and globalised financial environment. The total Islamic financial assets size now has surpassed $ trillion – following unabated growth from the mid-1990s.

There are now more than 600 Islamic financial institutions operating in more than 75 countries. Increasingly, existing Islamic banking institutions are expanding their operations with presence in new jurisdictions. This is resulting in increased cross border financial flows. There has also been increased international participation in Islamic financial markets. Since the late 1990s the Sukuk market has emerged as an important form of intermediation in Islamic finance. It has been instrumental in the financing structures for infrastructure projects, investments in the utilities sectors, in particular for water and power projects, and in the services sector, in education, healthcare and transportation. Islamic finance essentially offers clear value propositions to both global issuers and investors. For issuers, there is access to new sources of funds and liquidity. And in introducing a new asset class, investors gain from portfolio diversification and new investment opportunities that are aligned to productive investment activities. Internationalisation of Islamic finance: mutually-reinforcing benefits Islamic finance draws its strength from serving the real economy. An important feature of Islamic finance is that it involves financial transactions that must be accompanied by an underlying economic transaction. And when it is cross border, it will facilitate financial flows that will support international trade and investment flows. It will contribute towards bridging economies and enhancing our economic connectivity with each other. In this current global environment in which emerging economies are demonstrating their resilience with the ability to sustain growth despite the moderation in global expansion, there is tremendous prospects for mutually reinforcing growth from increased economic connectivity.